Older adults in Virginia and throughout the country are about twice as likely to get a divorce as people their age were in the 1990s. Along with this higher divorce rate for older adults comes the complications of having their assets cut in half just as they are nearing retirement age. Many older adults may also have limited employment opportunities. Therefore, divorce can present a number of challenges for this demographic.
There are certain financial errors that can compound those challenges. For example, people may fail to take into account the taxes or penalties they may incur if they make withdrawals from some accounts or liquidate them. There are taxes on withdrawals from 401(k)s and non-Roth IRAs, and liquidating a brokerage account can result in long-term capital gains taxes.
Another potential error is keeping the home. This is often an emotional decision, and people may give up some or all of their other assets in exchange. However, it is important to remember that keeping up a home can be costly. One woman who gave up her 401(k) to keep the home later had to retire early for health reasons and faced foreclosure. Selling the home is not necessarily a solution to the cost issue since it may involve expensive upgrades and inspections.
Divorce will present different challenges for people at different stages in their lives. For example, younger adults may have less property to deal with but may be facing years of sharing child custody and co-parenting. However, even older adults may have child custody issues, or if the children are not minors, the parents may still need to decide how to handle college costs. Negotiating a divorce settlement with the help of their respective attorneys gives the couple more input into the final agreement than litigation.