There are many changes as people go through life, and some can lead to divorce for a long-married couple.
Divorce for an older couple may be more amicable than it would have been at a younger age, but it may also be more complicated financially due to the accumulation of assets such as retirement accounts.
The 401(k) and your annuity
Both of you may have a 401(k). You may want to be generous to your spouse, but the fact is that you will have to follow certain rules in dividing your 401(k)s or one of you could face a surprise tax bill. Another type of retirement vehicle is an annuity, and each contract is unique. You may need to give up another kind of asset to your spouse but keep the annuity for yourself because you might lose value if you cash it out.
The QDRO explained
You need a qualified domestic relations order, or QDRO, to divide a 401(k). This is a decree that comes from the court. It acknowledges the right of a spouse to receive all or part of the plan, and you must submit it to the plan administrator.
The QDRO does not apply to an IRA. You will spell out the division of your IRA either in a separation agreement or in your divorce agreement, after which it goes to the IRA custodian. Tax rules apply, and to avoid penalties, you will want to understand them before you split an IRA.
According to data compiled by the Pew Research Center, so-called gray divorce has doubled for people over the age of 50 since the 1990s. If you and your spouse are about to go your separate ways, be aware that your financial picture is going to change. There will be two households instead of one that will be operating on the same amount of income that existed before the split. The more assets you have, the more a team of professionals such as an attorney, a financial planner and perhaps an accountant can help set you on the right track to a secure future.