Filing for divorce when you are nearing the age of retirement can be stressful and complicated. Most Michigan residents know that getting divorced when you are in your 50s or 60s typically means that your retirement benefits will be divided as part of property division in the divorce, which can result in less money to live on during retirement. Now is a particularly good time to consider ways of mitigating the financial effects of divorce when you are approaching plans for retirement.
As a recent article in Forbes explains, the divorce rate among older adults continues to rise, with “gray divorce” increasing by 109% last year. At the same time, divorce rates among younger age groups are declining. What does this mean? In short, divorce is becoming most common among older adults, and a large percentage of those people involved in gray divorces will need advice about protecting their ability to retire on time. A report in Barron’s provides financial tips for older adults who are nearing the age of retirement and are planning for a divorce. We want to discuss some of those tips with you.
Figure Out How Divorce Will Affect Your Social Security Benefits
In situations in which one spouse has earned significantly more than the other spouse, divorce can affect Social Security benefits. More specifically, in marriages that have lasted 10 years or more, the non-breadwinner spouse is entitled to receive half of the breadwinner spouse’s Social Security benefits upon the age of retirement (62 years old). Even if the breadwinner spouse does not immediately file for Social Security benefits, the non-breadwinner spouse is entitled to collect his or her half of the benefits.
Depending upon whether you were the primary breadwinner or non-breadwinner spouse, you should plan for Social Security benefits in retirement and how they will impact your budget. In sum, a breadwinner spouse should plan to receive only half of his or her Social Security benefits in retirement, assuming that the other half will go to the non-breadwinner spouse. The non-breadwinner spouse should plan to receive half of those benefits in planning for a retirement budget.
Calculate the Current Amount of Your Retirement Benefits
Whether you have a 401(k), an individual retirement account (IRA), or other retirement benefits, it is important to calculate what you have and to consider how divorce will change the amount you have. The most complicated factor in all of this is usually how the court will divide retirement benefits in the divorce. Once this happens, you can figure out exactly how much you have in each account, and you can consider whether you are able to make additional contributions.
Decide Whether it Makes Sense to Delay Your Retirement
While you might have been planning to retire as soon as you turn 62 years old, a brief delay in your retirement could allow you to retire with significantly more assets. As the Barron’s report emphasizes, a study published by the National Bureau of Economic Research (NBER) last year found that “delaying retirement by even a few months can be as powerful as saving an extra percentage point of your salary over the course of 30 years.”
Contact a Divorce Attorney in Michigan
If you have questions about planning for divorce and retirement, you should discuss your concerns with a divorce attorney in Michigan. Contact the Law Offices of Michael A. Robbins to learn more about how we can assist with your case.