Choosing between the house and the pension in a gray divorce

Retirement plans following divorce often center around who gets which assets

Divorce is rarely an easy time in one's life, but as Bloomberg recently reported, the rise of gray divorce is presenting many unique challenges for thousands of families. The divorce rate among older Americans has risen dramatically in recent years, giving rise to what has been called the gray divorce phenomenon. In many such divorces, one or both of the spouses is also planning on a retirement in the near-future and ensuring that such retirement plans are protected often requires careful and strategic planning.

Gray divorce by the numbers

The statistics concerning gray divorce are somewhat surprising. About a quarter of all divorces now involve at least one spouse older than 50 and people over 50 are twice as likely to divorce today when compared to just 20 years ago. Those facts are in spite of figures showing that younger couples are actually divorcing less frequently than ever before.

Experts say the increased gray divorce rate is largely being caused by increasing longevity, which in turn has led many couples to question whether they want to spend their retirements in a marriage that no longer leaves them fulfilled. Despite the desire for greater freedom and happiness, however, experts also caution that the financial risks of divorcing later in life are serious given that most people will not have enough time to rebuild their retirement portfolio if a divorce turns costly.

House versus the pension

The biggest question facing many gray divorces is over who keeps the house and who gets the pension. While pensions and other retirement benefits can be split between both spouses regardless of whose name the pensions are actually in, it may be worthwhile using the pension as a bargaining chip during the divorce process. The marital home, for example, may be worth more than the pension and could provide an important source of rental income during retirement.

According to USA Today, however, many people become unduly fixated on holding on to the house at their own expense. While forgoing the pension for the sake of the house may make financial sense for some people, it is important to remember that divorce will often require downsizing afterwards. While the home may be worth a lot, it can also be costly to maintain and its value is also at the mercy of market forces that can be highly unpredictable.

Retirement and divorce

Divorce is a difficult and momentous occasion in a person's life and the important decisions that will have to be made during this time should never be left to chance or poor planning. Anybody going through a divorce, especially later in life or when significant assets are involved, should contact a family law attorney immediately. An experienced attorney can provide compassionate legal representation so that clients can move forward through their divorce in the most informed and secure way possible.