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High-asset divorce and retirement

The divorce rate for spouses over 50 has doubled since 1990. Ending a marriage at this age can have consequences for retirement planning for these couples in Arizona and nationwide.

The first and most significant consequence is that divorce essentially divides financial assets by half. Couples generally planned a retirement based upon sharing a house, medical insurance and expenses. Divorce may divide these retirement assets and make each spouse responsible for their debts. An older spouse will also have less time to replenish lost savings through employment.

After a divorce, one's household income may drop while living expenses stay the same. This may make it difficult to place money in a 401(k) or other retirement plans.

Payment of spousal support is another new expense that can also diminish the ability to continue to save. New child care and support costs, and even having an additional home for the children, may also limit one's ability to put aside money for retirement.

There are several steps that one may take to overcome these challenges. First, a spouse should consider negotiating for a share of retirement assets. Taking an equitable share may be more valuable than one lump sum payment.

Next, keeping the house in return for giving up retirement benefits may be unwise and should be reviewed. Giving up assets and paying taxes and for its upkeep may be unduly costly.

There are also tax consequences for dividing certain marital property. This can play a role in evaluating what property should be sought in the property division process.

Eligibility for Social Security spousal benefits is another matter that should be explored. A spouse who was married for at least 10 years may qualify depending on the ex-spouse's earning record. These payments may be higher than a personal retirement benefit.

A qualified domestic relations order may be sought for retirement benefits that may be split. A QDRO is helpful for 401(k), pensions, defined or qualified retirement plans that may be divided.

An attorney can help ensure that one's legal options reflect the financial consequences of divorce. Lawyers may seek asset division that is fair and helps ensure an economically-sound retirement.

Source: Forbes, "Does divorce derail retirement?" Christina Gann Munguia and Paola Ramos, July 24, 2017

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