Starting over can be a challenge for anyone ending a marriage in Illinois. However, the difficulties are often greater for older adults. It's an increasingly common occurrence since the divorce rate among adults 50 and over has doubled since the 1990s. Some so-called "gray divorces" do involve second marriages or unions of a short duration. However, it's not uncommon for knots to be untied after many years together. This could mean having to make decisions about jointly owned accounts, investments and savings.
Regardless of the circumstances involved, a later-life divorce may put retirement savings at risk if certain precautions aren't taken. A common recommendation is for divorcing older couples to be cautious with spending, especially with larger investments like a new home. Having copies of tax returns and receipts, insurance documents and bank statements may further minimize unexpected hassles and surprises during the transition back to a single life.
Older divorcing couples are also often advised to run credit checks, know who owns what assets and be mindful of the tax consequences of changing a filing status to single. During the settlement process, it may be a smart move for the lower-earning spouse to seek pretax investments since they often result in a lower tax bill. If retirement income could put an individual into a higher tax bracket, a financial adviser or retirement planner might suggest transferring defined contribution plan funds or a traditional IRA to a Roth IRA. While Social Security payments aren't community property, pension plans are. Therefore, decisions will have to be made about related filing options.
When representing a soon-to-be ex, a family law attorney can provide valuable guidance. Potential issues with retirement savings may be minimized further if a client consults with a financial adviser during the settlement process. A lawyer may use information provided by this type of professional to make suggestions about what assets the client should fight for.