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Gray divorce can affect retirement plans

Although many people think of the typical divorcing couple as young to perhaps middle-aged, in recent years, more older people are deciding to end their marriage. According to statistics, the rate of older adults divorcing has increased significantly, prompting a special term for this situation: “gray divorce.” The trend may be due to greater financial independence of women in recent generations, empty-nest syndrome or other factors, but whatever the reason, Massachusetts couples making this decision later in life need to be aware of the potential effects of the divorce on their retirement plans.

For one, divorcing older couples may find a challenge when figuring out how to divide assets. Individuals who are divorcing in their 50s or 60s will likely not have a lot of earning potential ahead of them, as the asset pool is likely closing soon or may already be closed. People in this position may find it a greater challenge determining how to divide assets that will not be growing. Divorcing individuals also must keep in mind tax considerations during discussions around asset distribution. For example, if one party decides on early withdrawal on a 401(k), or they both do, they need to consider the penalties that will be involved, as well as the possibility of a higher tax rate on withdrawals.

Sometimes one or both divorcing individuals do not fully realize the cost of living separately, especially if they wish to maintain their established lifestyle. Such a realization may prompt them to change retirement plans, either pushing retirement to a later age or if they are already retired, to re-enter the workforce. On the plus side, couples who are divorcing at a later age typically do not have to negotiate child support or custody. However, if this area does require discussion, the parent paying child support may have to rethink retirement plans.

As with all divorcing couples, people who decide to end their marriage later in life are wise to collaborate as much as possible. Individuals going through the divorce process at any stage in life typically find the experience stressful enough, but keeping discussions as amicable as possible can alleviate some of this stress and will help to ensure each party moves forward into the future they envisioned, however long that may be. An experienced Massachusetts family law attorney can provide legal guidance throughout this process.


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