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How 'gray divorce' can affect retirement

Many Washington residents are counting on their 401(k) plans and other retirement accounts to provide a good living in their later years. However, despite all the work that people can do to save for retirement, life events can throw a spanner in the works. For example, the divorce rate among Americans age 50 and up has doubled in the past 20 years. When people choose to divorce over 50, their retirement assets could be significantly impacted, and they may have fewer years during which to recover from the blow.

Retirement funds can be some of the largest marital assets held by a couple of any age. They become far more significant to people divorcing later in life because the funds will be needed in the relatively near future. In addition, it costs more to pay for two single retirements than it does one joint retirement. Therefore, dividing a retirement fund in half doesn't leave either partner as well off as they were before they began the process.

When a couple has been married for a short time, the effect on retirement finances could be minimal. However, when a couple has been married for decades, a much deeper division is far more likely. When going through the property division process, it is important to keep the tax status of different assets in mind. For example, a Roth IRA includes post-tax funds while distributions from a 401(k) or a traditional IRA will be taxed later.

Divorce later in life can carry a range of potentially unexpected financial and practical considerations. A family law attorney can help a spouse going through a "gray divorce" reach a fair agreement on a range of matters, including spousal support and asset division.

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