Can a gray divorce drain your retirement funds?

On Behalf of | May 23, 2024 | Divorce

As you head into your 50s, your thoughts start to turn towards your retirement years. You frequently check the balances of your 401(k)s and other investment accounts and understand how much you’ll have saved by the time you exit the workforce.

However, all that planning may be upended by a “gray divorce”, a term used to describe the increasing trend of older couples who divorce after decades of marriage.

Community property laws

Washington is a community property state, meaning that any assets acquired during the marriage are considered jointly owned and must be divided equally in a divorce. This can include real estate, savings and retirement accounts.

Dividing retirement accounts means each spouse may have a smaller nest egg than anticipated. This can significantly alter retirement plans. Retirement may need to be delayed or living expenses reduced.

Another potential hardship is losing access to a spouse’s health insurance plan. This can be a significant financial burden for someone nearing retirement age but not yet eligible for Medicare.

A gray divorce can also affect Social Security benefits. If you were married for at least ten years, you might be eligible to claim benefits based on your ex-spouse’s earnings record, which could be higher than yours. 

You can take steps to protect your retirement funds. First, you will want to inventory all your retirement accounts and their current values. This also includes knowing the specific rules governing each type of account and how they can be divided.

During divorce negotiations, you will need to consider the long-term consequences of dividing retirement funds. You may want to trade off other assets to retain more of your retirement. You will want to work with someone who can help you navigate the complexities of a gray divorce and asset division, ensuring you make informed decisions that protect your financial future.


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