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Divorce can create havoc with retirement plans

In past decades, it was rare to see older couples file for divorce. However, since 1990, among couples age 50 and older in the United States, the divorce rate has doubled, according to statistics provided by Bowling Green State University's National Center for Family and Marriage Research in Ohio.

With Americans living longer and the Baby Boomer generation aging, New Yorkers will continue to see "gray divorces" occurring. One estimate suggests that by 2030, 800,000 senior divorces will take place each year.

These later-in-life divorces are usually accompanied by a downsizing of the lifestyle the former partners led together. Perhaps they each move to smaller homes and vacation less frequently. Depression can result from unfulfilled dreams of growing old together.

Other consequences may occur, like financial belt-tightening, when divorcing couples divide assets, which can include retirement plans. Suddenly, both are facing their golden years with far less of a financial cushion but with rising expenses.

The National Center for Family and Marriage Research's co-director urges couples in the throes of divorce to negotiate carefully to walk away with the best settlement possible. When feelings run hot and reason is clouded by emotion, it can be difficult to consider your best options.

Experts realize that the potential for growing your portfolio at this stage of your life lessens, so locating a reputable financial planner can be as important as securing a dedicated divorce attorney. Financial experts can assist divorcing couples with making forecasts regarding their cash flow, maximize their tax-free distributions and make retirement plan laws work in their favor.

The legal process of discovery can reveal hidden nuggets of retirement plan gold. Financial experts working in conjunction with divorce attorneys can ferret out hidden or overlooked assets through forensic analysis and come up with gems like stock options and deferred-compensation plans.

Sometimes small but significant pension benefits are discovered from early employment or military service. Income from splitting these assets can make a difference in your final settlement.

Source: The New York Times, "Retirement Plans Thrown Into Disarray by a Divorce", June 27, 2014

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