If you’re nearing retirement, you no doubt have grave concerns about how the novel coronavirus (COVID-19) will impact your New York divorce case. A recent US News & World Report article outlined some challenges retirees are facing, with retirement accounts losing value, the Federal Reserve cutting interest rates, and an economic rebound seeming quite far off. However, you could be in an even more alarming position if you’re contemplating divorce in the context of retirement. So-called “gray” divorces are on the rise according to the results of a study published by Forbes, showing that the number of couples choosing to end their marriage has actually doubled in the last two decades.
Fortunately, there are ways to protect your retirement assets in a New York divorce case, and a New York divorce lawyer can advise you on the best strategies for your unique situation. Some possible tips include:
- Consider Selling the Marital Home: In a gray divorce, your household income will drop significantly, and not just due to the fact that you’re no longer in a dual wage situation. On average, earnings drop for both men and women once they reach 50 years old. One recommendation to better align your spending with your income is to sell your marital home in the divorce process. If you can cut monthly housing costs by moving to a less costly residence, you can apply this amount to your retirement accounts. Current tax laws allow people 50 years and older to deposit into 401(k) and IRAs up to a certain threshold without penalty.
- Work Out an Agreement: The court doesn’t need to determine every issue in divorce, and New York law actually encourages marital settlement agreements as an alternative to going through a protected hearing process. If you and your spouse can reach an accord on asset division, spousal support, and other issues, the court will not likely disturb the arrangement. For parties that both have retirement accounts and related investments, you might be able to come to an agreement. Your respective attorneys can handle the negotiations process, reducing the possibility that emotions will get in the way.
- Put Off Retirement or Go Back to Work: If the COVID-19 pandemic has had a significant effect on your financial future, you might consider postponing your retirement until after the divorce process is complete. Alternatively, you may want to re-enter the workforce, possibly on a consultation basis. With another year or two of steady income, there will be less of the financial stress that typically occurs after divorce.
- Roll Over Retirement Accounts You Split: When you’ll be dividing a portion of your spouse’s retirement assets as part of divorce, you should decline to take a cash distribution of the proceeds. Instead, roll it over into your own retirement account so you’ll gain the benefit for the long term.
- Prioritize Income over Retirement Account Value: When retirement is just over the horizon, your focus should be on the income value of your assets instead of the dollar amount. The goal is to make sure you’re generating a sustainable income to carry you for many years.
Discuss Retirement Issues with a New York Divorce Attorney
If you’d like additional recommendations on how to protect your retirement in the New York divorce process, please contact The Mandel Law Firm at (646) 770-3868 or via our website. We can set up a consultation at our Manhattan office to review your circumstances and determine whether these or other tips may benefit your situation. We’re also happy to assist with negotiations, preparation of agreements, and going to court as necessary to best serve your interests.