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Important considerations for older adults considering divorce

There is no question that the idea of divorcing after the age of 50 can prove to be a rather frightening prospect. In fact, many otherwise unhappy spouses probably decide to put off divorce for fear that it could wreak havoc on their personal and their financial lives.

Regarding these financial concerns, they may worry that a divorce could potentially derail their plans for the future, meaning they'd see their hard-earned income reduced, have to work longer than they'd like, or even be forced to take a part-time job during what was supposed to be their retirement.

The good news is that this isn't always the automatic result of every divorce involving couples age 50 and older, and that many older people who divorce go on to live quite comfortably during the remainder of their working years and on through their retirement.

This isn't to say, however, that older divorcing couples are free from all concerns, as experts indicate that they will still need to have a plan moving forward and also make thoughtful decisions concerning the division of assets. To illustrate, consider the following examples.

Retirement funds aren't created equal ... at least as far as taxes are concerned

Divorcing older adults must remember that many of the retirement accounts with which they have grown quite familiar over the years -- 401(k), 403(b), Individual Retirement Account (IRA) -- are funded with pre-tax dollars, meaning any funds eventually withdrawn will subject to taxation. However, other retirement accounts -- Roth IRAs -- are funded with after-tax dollars, meaning any funds eventually withdrawn will not be subject to taxation.

Accordingly, experts remind divorcing older adults to remember that thanks to an impending tax bill $400,000 in a 401(k) is not equal to $400,000 in a Roth IRA.

Home isn't always where the heart ... or the money... is

Many divorcing older adults will automatically assume that they should do whatever they can to keep their home. According to experts, however, this may not necessarily be the best move given that homes present certain expenses. Some of these expenses are ongoing (utility bills, homeowners insurance, property taxes, etc.), while others are unexpected (broken pipes, foundation issues, etc.) or just plain costly (new roof, new furnace, etc.).

Furthermore, experts point out that unlike a savings account, the value of a home can fluctuate wildly, potentially leaving the older adult with less than they hoped to secure in the divorce.

Accordingly, experts indicate that those parties considering keeping the marital home to keep these considerations in mind during divorce negotiations.

If you have concerns regarding divorce, property division or other general family law issues here in Minnesota, you should strongly consider consulting with an experienced attorney who can outline your options and enforce your rights.

Source: Forbes, "4 divorce mistakes that can derail retirement," Marilyn Timbers, August 21, 2013

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