Wisconsin is a community property state, so property division can become a touchy subject for couples going through a divorce. While most younger people worry about the house and other shared investments, most people approaching retirement are worried they will lose their retirement savings. This is especially the case for the sole breadwinner who earned that income but most now share it with their ex-spouse.
If this is your position, you may worry about recouping that loss in time for retirement. Maybe you are already retired and now worry that you will not have enough to make it through the rest of retirement. It is important to remember that if your spouse is the same age, they are in an even more frightening position as they may have a harder time than you getting back into the workforce.
CNBC warns that without a doubt, a costly gray divorce can turn a person’s retirement plans upside down. Many of these people were married for 20 years or more and acquired a lot of assets — or debts — during this time. People going through gray divorces also tend to fall into more traditional family patterns where wives worked fewer hours and for lower pay rates or not at all. This left their financial future, including their retirement plans, dependent on their husbands.
Finding a compromise and being empathetic to each other’s positions going forward helps to reduce the cost of the divorce and you may find a better compromise for your retirement plan. CNBC also recommends the following:
- Wait until the divorce is finalized to transfer money out of the retirement accounts even or you may face taxes and penalties.
- Avoid just writing a check to your ex-spouse to divide up the retirement accounts as you may face penalties and taxes; use a QDRO.
- Get professional advice about the benefits of giving something else up in place of the retirement accounts, such as the house, cars or investment accounts.
So, should you be worried? If you are young, even if you are just passing the 50-year-old threshold, you have several years ahead to recoup your losses. If you are already retired or close to retirement, many people over the age of 65 are returning to the workplace to fill their time and to replenish their savings. Try to keep a solution-focused mindset and you will worry a lot less about what the future holds.