Divorce among Baby Boomers is growing and is having an impact on retirement savings, according to new research.
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The divorce rate for those ages 50 and older doubled between 1990 and 2010, according to a Bowling Green State University study. According to the results of a recent survey from the American Academy of Matrimonial Lawyer (AAML), the top three items most commonly fought over during divorce proceedings for this age group are alimony (83%), retirement accounts and pensions (62%) and business interests (60%).
“As people live longer, their relationships can change in some very dramatic ways, but spouses within this age range also need to be extremely mindful about the complexities of negotiating key issues involving spousal support and retirement accounts,” said Joslin Davis, president of AAML.
John Slowiaczek, president-elect of AAML, discussed with FOXBusiness.com what Boomers need to know to protect their retirement savings during a divorce. Here is his advice:
Boomer: What are the reasons the divorce rate for people over age 50 is rising?
Slowiaczek: People are living longer and there are often less children in families. As a result, couples often face the prospect of spending years or even decades alone in the home with one another, and they ultimately decide to end the marriage altogether. In addition, women these days are working and have established successful careers. They are less predisposed to stay in an unhappy marriage for the financial stability and feel more comfortable living their own lives without a spouse. This is certainly the case when both spouses have contributed to their own retirement plans and wealth plans and can leave the marriage with these accounts.
Boomer: How does divorce among Baby Boomers impact retirement savings for this generation?
Slowiaczek: Everything suddenly needs to be divided into two. When there are two spouses living together throughout a marriage, they can often lose sight of how financially convenient the arrangement can be. Splitting your assets and starting over with two households instead of one can become an expensive proposition. In many cases, it can often limit your ability to spend on many necessities that you might have previously taken for granted. As an example, the cost of an individual health insurance plan can be much higher if the spouse is not yet eligible for Medicare.
Boomer: You say long-term alimony can serve as a very powerful negotiating tool for dependent spouses. Explain?
Slowiaczek: The prospect of paying long term spousal support can quickly alter many career goals and previously held assumptions about retirement. The concept puts the payer in a position where they must face the stark reality that they might not be able to retire at the age that they had always intended to. In other words, if you are facing a large alimony obligation, then you might have to contend with working for a much longer period of time than you would like. Many people would be willing to give up more assets upfront in order to avoid this kind of situation. These negotiations are also further impacted by the age of the potential paying spouse.
Boomer: With business interest being one of the top three commonly fought over items, according to the AAML survey, is there a way Boomer business partners can prepare in the event of a divorce?
Slowiaczek: Boomer business partners should definitely draw up buy-sell agreements with one another and make sure that all the spouses involved participate and sign the documents. If the spouse also signs off on the buy-sell, then it becomes more difficult for the non-owner spouse to contest the valuation concept set forth in the buy-sell, and in the event of a divorce, the court will more likely find the agreements binding. The process forces everyone to be realistic with the company’s valuation and removes the possibility of battles and disputes further down the road.