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How does a divorce later in life impact retirement?

If you are contemplating a divorce and are in your 50s or 60s then you need to pay close attention to the information that I provide to you in this blog post. While your divorce process will look very similar too many of your neighbors have also gone through a divorce the fact is that your case will have circumstances that are unique to people in there 50s and 60s. in the world of family law these divorces are known as Gray divorces. As your children have grown up and left the home and as you approach your retirement years the issues that you face can be significantly different than the issues you would have faced 30 years ago. 

Being intentional with your divorce planning is important no matter what age you are. Would I like to tell people about divorces that you can wander into a divorce, but you cannot wander out of a divorce and have a successful outcome. The fact is that you and your spouse have an opportunity to work through the issues of your marriage and arrive at an outcome that can be mutually beneficial. This does not occur all that regularly because it is rare for two people to be intentional, rational and fair with their spouses in a divorce. My hope would be that you and your spouse are exceptions to this rule.

Here is what you have to consider as you start your divorce. If you failed to develop a plan for your divorce case it is likely that your spouse will not be as complacent. While you failed to prepare your spouse will be preparing his or her plan to take advantage of your inability to think ahead and make meaningful advances in your strategy for the divorce. You will not benefit from this strategy and the overall outcome of your case will be skewed in favor of your spouse. Again, you can wander into a divorce, but you cannot wander out of the divorce. 

Being intentional about your divorce means focusing on the issues that are most likely to arise. You need to understand what issues are important for you as a person in your 50s and 60s and what issues are not likely to cause much of a problem for you and your spouse. This could mean that you need to focus you are attention on issues regarding your family home, investments and other financial instruments like retirement savings. If you have been diligent about saving for your retirement, then a divorce kid offer you a time to be up in arms and very upset. You have likely heard stories about how family members or friends had their retirement savings rated by a spouse and were left struggling to support themselves in their post-divorce lives. 

The reality of your situation is that you are much more likely to settle your divorce with your spouse in something called mediation rather than to have a judge decide the case for either of you. That doesn't mean that your case will have no shot at being heard by a judge, but it does mean that it is far more likely that a divorce is settled in mediation rather than is determined by a family court judge. This should tell you that it is more important for you to learn how to negotiate with your spouse that is too strong arm a judge or prepare for a long and hard fight when it comes to a trial. 

If you and your spouse have a good relationship, despite your divorce proceedings, then this should give you some optimism. All the two of you have to do is determine what your mutual goals are focus on what they are and then find some middle ground where your goals differ. It is easier and more efficient to do this with your spouse that is to push in a headstrong fashion towards a trial where neither party knows which way a judge will go based on the facts and circumstances of your case. With that said, how you approach your divorce from the perspective of your personal finances will have a big impact on its ultimate outcome. 

In the event that you are most concerned with your retirement savings then you should be quick to heed the advice that your financial coach or retirement savings professional as likely provided to you over the years. On the one hand, if you are in a position where you began saving for retirement at a young age then you can likely afford to be a little bit more aggressive in the back end of your working life as far as your investments are concerned. All the time that your money is had in the market as likely puts you in a position where you are looking at some pretty significant numbers in terms of retirement savings. On the other hand, if you are just starting out your retirement savings at an older age you cannot afford to be as aggressive. Whatever the case may be, you should look to your divorce in a similar fashion. 

What I mean by this is as an older person going through divorce you need to understand that the decisions that you make have significant impacts on your life after divorce. On the other hand, if you are a younger person going through a divorce then you have time to make up for mistakes made in the divorce. Seeing as how I am writing this blog with older people in mind those of you who are in your 50s and 60s need to be especially keen about developing a game plan and following it in regard to your retirement savings

Retirement savings as a part of the community estate 

Your retirement savings are subject to division in your divorce if any portion of them falls within the community estate. Typically, property accumulated during the course of your marriage it's considered to be community property. This means that both you and your spouse take a complete and total ownership interest in the property no matter whose name appears on the retirement account or whose income was utilized within the investments. So, if you have been the breadwinner in your marriage for the whole of the relationship it does not matter if your spouse is not work today outside of the house. Her ownership stake in the retirement savings that you have built is equal to your own stake in the retirement savings. 

Contributions to your retirement savings from before your marriage are classified as separate property. But, for those of you that have been married for some time then the bulk of your retirement savings is likely to be classified as Community property in the divorce. This means that you need to be aware that your spouse is likely entitled do a portion of these benefits and that both of you need to be aware of what this means for you in your divorce. Developing a plan on how to address this issue is key. Do not assume that because you earned the money within the account that you would get preference when it comes to awarding the savings in a trial situation.

as I mentioned to you earlier in this blog post since you and your spouse are going to have the opportunity to negotiate issues regarding the division of your community estate then both of you can get creative when it comes to dividing up property and debts. Your retirement savings may not need to be touched during this portion of your case, but you may find yourself giving portions of your equity in the family home, other forms of investments another property to your spouse in order to maintain your retirement savings at its current number. 

On the other hand, if you earn a good living for yourself, believe that you have many years of employment in front of you and have other assets to be able to rely upon in your post work years then you may be may more willing to divide up your retirement benefits. People with multiple streams of income, in advanced education and solid job prospects for the future tend to fall into this category more so than people who are less educated, have a shakier outlook unemployment or maybe in poor health. 

Basically, if it is your retirement benefits that are in question to be divided in universe then you need to consider what your own circumstances are before moving forward with the strategy on whether or not to work towards protecting those benefits at all cost. Keep in mind that what worked well for your neighbor or friend may not work well for you. If you have been diligent about saving for retirement add an early age, then you may have more in retirement then you would be able to spend in your post work years. Therefore, rather than sacrificing property elsewhere it may be in your best interest to agree to a division of your retirement benefits if that is what suits you and your circumstances better. 

Let's now look at these circumstances from the perspective of a spouse who has not worked outside the home and has no money saved up for their own retirement. Imagine a case where you have been a stay at home parent and spouse for many years and have never worked outside the home at all. While it is undoubted that you have contributed a great deal to the marriage into your home life the fact remains that you have no money to your name tucked away for savings or for long term retirement plans. As a result, you may be heading into your divorce with concerns about how it may be that you and your spouse end up dividing his retirement benefits. 

One thing that you should be aware of is that you are starting off behind your spouse when it comes to retirement savings not only because you have nothing in the bank but because you are likely to be an older person, have less of an education compared to your spouse and may yourself not be in the best of health. If any of these circumstances sound familiar or are relevant to you then you need to consider how strongly you should be negotiating for any portion of your spouse's retirement benefits. If you do not know how much in the way of retirement your spouse has then you should request that information in discovery.

The last thing I would mention is that you need to be clear on how your final decree of divorce needs to be worded as far as the individual retirement account is concerned. Most plan administrators for retirement plans require that your final decree of divorce and any other documents relevant to dividing up the retirement account need to have certain language included in order to allow the plan to divide up the money. Make sure that your attorney has requested the exact language needed from the plan so that there are no hiccups after your divorce when it comes to getting you your money. You do not want to have gone through all of the difficulties associated with your divorce only to find that you can't get your hands on the money and she had negotiated for successfully. 

Questions about the material contained in today's blog post? Contact the Law Office of Bryan Fagan

If you have any questions about the material contained in today's blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week in person, over the phone in via video. These consultations are a great way for you to learn more about our law office as well as the services that we provide to our clients. Our attorneys take a great deal of pride in being able to serve our clients in the courtrooms of Southeast Texas and we invite you to contact us today in order to learn more about how we may help you and your family during a difficult time in your lives. 


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