On behalf of North Tampa Legal Group posted in divorce on Monday, January 25, 2016.
As a Florida law firm, we have helped couples of all ages through the emotionally and financially difficult process of divorce. Notably, some of our clients were couples who planned on spending their retirement years in Florida.
Although divorce can be difficult at any age, those in a gray divorce may face extra financial difficulties. The term refers to couples nearing retirement age that decide to file for divorce. With fewer working years left before retirement, it can be difficult to stabilize one’s finances.
Fortunately, there are strategies that we offer to older couples facing divorce. The starting point is to define the marital estate, clearly allocating how all assets and debts will be divided in the divorce. Next, an individual should prepare a budget for his or her income stream(s) after the divorce. That planning should also incorporate a review of estate planning documents.
Specifically, getting divorced only a few years before retirement can drastically alter previous projections of retirement income. Instead of dual benefits, an individual’s budget may be halved. Fortunately, there are strategies to maximize one’s savings before retirement.
Called the catch-up rules for retirement contributions, the provisions allow individuals age 50 or older to contribute more to their 401(k) or IRA accounts than younger workers. For 2016, that extra amount is $6,000 over the standard limit in a 401(k) account and $1,000 extra in an IRA, whether it be a traditional or Roth IRA. Those contributions can really add up, considering that the standard limits are already sizable: $18,000 for a 401(k) account and $5,500 for IRAs.
Source: Forbes, “Easing The Financial Impact Of Divorce In Retirement,” Juliette Fairley, Jan. 22, 2016