Close attention to retirement accounts required in a ‘gray divorce’

When a long-term marriage ends, it may be necessary to fight for a fair property settlement that will ensure adequate money to last through retirement.

Following a divorce, each former spouse usually must cut back on expenses to make ends meet. Mistakes made during the divorce process could also derail retirement plans.

Divorce of high net worth individuals later in life has become more common. Since 1990, the divorce rate for those over the age of 50 has doubled, according to a study conducted by the National Center for Family and Marriage Research at Bowling Green University. With our aging U.S. population, the number of these 'gray divorces' is projected to reach an annual rate of 800,000 by 2030.

Making up a shortfall in retirement assets becomes harder the closer you are to leaving full-time work. Here are a few tips for avoiding common mistakes.

Do not let emotion dictate

When a long-term marriage ends, there will be emotional ups and downs as the process unfolds. When the focus stays on the failed relationship, it can easily affect negotiations. For instance, you may fight to keep a home that you cannot afford to maintain, because of an emotional attachment.

Hiring a financial planner may be one way to move past the emotion and focus on the numbers. Seeing the numbers related to assets and debts and receiving advice from a knowledgeable family law attorney about issues such as property classification may allow you to view the divorce as more of a business transaction.

Look out for old pension plans or 401(k) accounts

You or your former spouse may have worked for a California state agency and vested in a pension plan. That may have been many years ago, but if the account was not rolled over if could easily be missed. Past military service could also mean there is a long forgotten pension.

Undervaluing retirement savings assets, such as deferred-compensation plans or stock options in an inventory is another easy mistake.

Failing to account or incorrectly valuing an account may leave money on the table. A clause in the divorce settlement that states later discovered assets be split evenly may avoid this problem. Whether an ex-spouse would admit to finding the account is questionable. During the divorce, it may also be wise to hire a forensic accountant, if there are concerns about hidden or forgotten accounts.

Consider whether Social Security benefits may be available

Often overlooked, but a potentially large piece of the retirement puzzle are Social Security benefits. If your ex-spouse earned the majority of the family income over the years you may qualify for a portion of his or increasingly her Social Security benefit.

An initial requirement is that the marriage lasted at least 10 years. Researching when and how to claim benefits can result in a larger monthly payment over the course of retirement. One note of caution: remarriage generally means you lose access to an ex-spouse's Social Security benefit.

While spousal support may also be available, it may be a short-term fix. Money provided by a spouse's parents that allowed a couple to lead a lavish lifestyle did not factor in a recent California case where spousal support was an issue. The court considered the marital living standard had been unreasonably high and when the stream of money stopped, there was no income to pay spousal support.

A family law attorney can provide more guidance on the divorce process and California law on the division of retirement assets. Immediately seeking guidance is the best way to avoid costly errors.

Keywords: High net-worth divorce, property division, retirement accounts