Going through a divorce at any point in your life is bound to have an impact on your financial circumstances. After all, you will have to split the assets and debts acquired during your marriage with your ex. Then there is the consideration of the cost of the divorce itself.
Depending on how contentious your divorce is, you could spend thousands or even tens of thousands of dollars before the courts finalize the end of your marriage. Many people stay in unhappy marriages simply because they worry about the financial consequences of securing a divorce.
This is particularly true for older adults considering a “gray divorce.” If you are one of these individuals, it may be time to seriously look at how divorce changes your financial circumstances.
Yes, you will have to share your pension or retirement account
Michigan courts want the outcome of any given divorce to be as fair as possible. In order to pursue a fair split, the courts will review the specific factors of the marriage, ranging from how long it lasted to the contributions of each spouse. They will also look at the future earning potential of each spouse. Then, they will divide the assets according to what they believe is reasonable and fair.
Unless there is a very strong prenuptial agreement that addresses the pension or retirement account, any amounts acquired or deposited during the marriage will likely be subject to division. In some cases, the courts may issue a Qualified Domestic Relations Order (QDRO) that instructs the plan manager to divide the account balance between two accounts.
Other times, the courts may choose not to divide the account directly, but instead offset its value by allocating other valuable asset to the spouse who does not own the account or receive the pension.
Keeping things amicable can help you keep costs low
If it is possible for you and your ex to file an uncontested divorce, that may be the best option for both of you. Either independently or through mediation, you can agree to terms for the asset division process in your divorce. It’s important that you have your own attorney review the terms to ensure that they are fair and reasonable for the circumstances.
If you don’t have to litigate with one another in court, the overall cost of your divorce will be lower. Whatever approach you take to getting divorced, you should expect there to be some impact to your retirement. You may need to work additional months or even years to rebuild your savings. In some situations, compromising your expectations for retirement can serve the same purpose.
Whether you choose to live with a roommate or reduce how much you travel, minimizing the cost of your retirement could allow you to retire as planned regardless of the fact that you have divorced later in life.