California couples may be surprised to learn that the rate of divorce for individuals between the age of 50 and 64 doubled from 1990 to 2014. Perhaps even more alarming is that the divorce rate tripled for people older than 65 during the same time period. Many of these older divorcees are facing challenges regarding their retirements.
Despite who a retirement account belongs to, each spouse could be entitled to half the account if it was acquired during a marriage. One should make sure to change the beneficiaries for accounts if a former spouse is listed.
When dividing retirement accounts, remember to think about the associated tax costs. One pays taxes on a Roth IRA or Roth 401(k) when contributing to an account while taxes apply when withdrawing money from an IRA, pension or 401(k). Couples must remember to split accounts based on the after-tax value. If each spouse is in a separate tax bracket, the higher wage earner would need more to equal the lower earner’s share after taxes.
People sometimes compromise and give up some assets in exchange for others. However, individuals should be careful when trading a retirement plan. For example, giving up half a retirement fund for a home is risky as real estate is harder to maintain and could lose value while retirement funds are more likely to increase in value.
Ending a marriage brings up financial concerns for everyone. However, divorce can be more worrisome when one is also near retirement age. While adults over 50 are less likely to have child custody issues, alimony could still be a large concern along with retirement accounts.