The baby boomer population is mostly alive and well in California and nationwide. They are entering their retirement years and making out their estate plans to transfer a massive base of wealth to their heirs in the coming years. What happens to the normally structured procedure of retirement and estate planning when a couple decide that it is necessary to get a divorce later in life?
One fact that is now well-known is the rapid growth of divorce in the population of age 50 and older. In addition, when a baby boomer divorces and gets remarried he or she is twice as likely to divorce. It might be said — with only half of one’s tongue-in-cheek — that marriage, along with divorce, are habit-forming transitional experiences.
The Pew Research Center identifies gray divorce as a largely baby boomer phenomenon. Other experts warn that divorce can impact retirement planning. New focus and new ideas will have to be injected by the older individual who is seeking a divorce. One common shock that people report is that, although their income subsides post-divorce, they do not usually experience a concomitant reduction in expenses. Getting a handle on the new financial numbers will require becoming familiar with them first.
In California, when meeting with one’s attorney all assets and expenses will be reviewed. The list should be adequate enough to present a full picture of where the money will go each month after the divorce. Planning can come after one becomes entirely intimate with the inflow and outflow of money under the new paradigm, including with respect to how taxes will influence and impact the amounts available for budgetary purposes. Where one has existing retirement accounts, such as a 401(k), there are actually certain tax benefits that may be feasible and available. For example, anyone 50 or older can contribute an additional $6,000 to an approved retirement plan each year.