AFTER enduring a divorce four years ago,
''The financial belt needed to be tightened,'' said
The divorce rate in
Besides causing depression and dashing dreams, these divorces can sabotage retirement plans as assets are cut in half and expenses as a divorced single rise. For some older people, emerging from divorce with retirement plans intact can be challenging.
''There isn't much time left to enhance portfolios post-divorce,'' said
Spouses over 50 often bring fat pensions and defined-contribution plans to the table, making some settlement fights especially ugly, experts say. But failing to battle for your share can cost hundreds of thousands of dollars more down the road, said
At the same time, newly divorcing couples may feel stress and depression, which can complicate decision-making. ''One likely result is that people delay making important financial decisions,'' said Michal Ann Strahilevitz, professor of marketing and behavioral economics at
To avoid this emotional logjam and negotiate a better settlement, experts suggest hiring a financial planner even before finding a good divorce lawyer. These planners can help divorcing spouses navigate a maze of retirement plan laws, make cash-flow forecasts and maximize tax-free distributions.
This financial prowess is needed early in the battle over retirement nest eggs. The inventory of assets that couples make when disclosing their investments is one example. Sometimes, esoteric assets like deferred-compensation plans or stock options may be overlooked or misunderstood in the inventory, Ms. McBurney said. Or the highest-earning spouse may unknowingly forget some assets.
''Post-divorce, you may discover that an ex-spouse had a leftover pension from a job long ago or from military service,'' Ms. McBurney said. ''Later, you may not be entitled to the income from those assets.'' Some people get around that, she said, by adding a clause to the divorce settlement agreement that says assets discovered later will be divided in half.
Fights are more contagious around retirement assets, Ms. McBurney said. She counsels that haste is a terrible mistake.
She suggests hiring forensic accountants or other experts, if you need them, to find additional assets, which may be hidden. ''There's no do-over,'' she added.
Once on the inventory, defined-contribution plans and pensions offered by employers are usually divided by using court orders called qualified domestic relations orders, or Q.D.R.O.s. They may be included in the divorce settlement agreement that splits up retirement plan assets, said
But Ms. McBurney said it was important to make sure the orders were accurate and appropriate for your individual situation. Errors can be costly. Often the standard form used for administrative purposes by an employer will need to be modified by a lawyer to suit an individual settlement.
''Attorneys should know enough to read the Q.D.R.O. forms and adjust them,'' Ms. McBurney said. ''The slightest word change can make all the difference.''
Taxable issues can also reduce seemingly hefty retirement plan assets. Defined-benefit plans, for example, are usually taxable when a person receives the funds, said
Even alimony can be more complicated than it might seem at first. People forget that alimony is taxable, said
Instead, people go after emotional assets like a house,
As for moving on after divorce,
The lesson in gray divorce,
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