Minnesota residents may be surprised to hear that since 1990, the divorce rate for couples over 50-years-old has doubled. This is especially significant because many of those couples are nearing retirement and have built up a significant amount of assets. There are ways, however, to preserve one’s finances after a divorce.
First of all, before taking the leap into divorce makes sure one has a good idea about what is going on in their bank account — both earnings and expenses. Also, take the time to educate oneself about how their spending will change post-divorce. Some expenses may go up once one is single, such as auto insurance.
In addition, it can help not only to understand one’s current sources of income, but also other income sources out there that one could use. This is important because one’s income can go down after a divorce — 41 percent for women and 23 percent for men, according to a Government Accountability Office’s 2012 report.
Sometimes, downsizing one’s home or renting out a room may be one way to free up some income. One can also take a side job, such as dog walking or running errands for other individuals. Applying for Social Security may also help.
Minnesota is an equitable distribution state, when it comes to property division, meaning that the couple’s assets will be divided in a way deemed fair, but may not result in a 50-50 split. Retirement assets, just like the house or a car are assets subject to property division. If an individual is granted a portion of his or her ex’s 401(k) per a qualified domestic relations order, that individual may be able to transfer these funds into an individual retirement account (IRA), which would retain these assets’ tax-deferred status.
In the end, if one is divorcing later in life, it is more important than ever to keep one’s retirement in mind. A divorce can cause a person to take a financial hit, but it is entirely possible to bounce back financially. By understanding one’s current financial situation, their ability to earn extra income and retirement accounts will look like post-divorce, one can be in a good position to understand what their overall financial picture will be once their marriage has come to an end.
Source: The Christian Science Monitor, “Don’t let divorce wreck your retirement plans,” Arielle O’Shea, Nov. 11, 2016