Legal Blog

Gray Divorce: The Top Three Mistakes People Make with their Retirement Accounts During Divorce

Gray divorce may not be a term many are familiar with, but it is a phenomenon that is on the rise. Sociologists are using this new moniker to describe the rising number of couples getting divorced over the age of 50. Mature couples face a unique set of circumstances when divorcing. Retirement accounts are of particular concern because there is less time to recover financially from the divorce before needing to use those funds.  Here we will take a look at three of the most common mistakes people make with their retirement accounts during divorce proceedings.


1) People take money out of their retirement accounts to adjust the rights and equities between the parties.

The mistake: the withdraw is taxed and penalized resulting in a 50% (roughly) net amount. The remedy is to use a qualified domestic relations order which allows us to move money without the tax consequences and without the penalty.


2) Treating retirement money like cash when dividing assets.

The mistake: not realizing that retirement money is different from other money because it has been tax protected. Once it is withdrawn, it will be taxed. This is different from a cash account which does not usually have tax consequences.


3) Beneficiary designations must be changed with the plan administrator.

The mistake: Neglecting to change the beneficiary designations and assuming that divorce agreements will suffice. Unfortunately, that is not the case. An agreement that reflects a waiver of a retirement account will not trump a beneficiary designation. The designations must be actually changed.


While we have particular concern for divorcing couples over 50 when dealing with these issues, they hold significance for every divorcing couple. The mistakes permeate all ages. It is important to remember that the purpose of a retirement account is to help pay for your living expenses when other primary sources of income no longer exist. You may need to rely on these funds for 20 to 30 years in retirement. Before making changes to, or a withdrawal from your retirement account, work with your attorney to carefully assess your current and future financial situation.



If you are facing a divorce, please contact Linda Sorg Ostovitz at or 301-575-0381. No matter the stage of life, I have the experience to work with you to ensure the best outcome for you and your future.




Linda Sorg Ostovitz is a family law attorney. Her legal experience spans more than 36 years. In this time, she has served as a leader, educator and advocate. Mrs. Ostovitz holds a prestigious fellowship in the American Academy of Matrimonial Lawyers. Currently, she serves as President for the Business Women’s Network of Howard County, by which she was chosen Woman of Distinction for 2014. Mrs. Ostovitz represents clients in Howard, Anne Arundel, Carroll and Baltimore Counties. Her practice focuses exclusively on divorce litigation and mediation, child custody and access, child support, alimony, business valuation, as well as property and asset distribution. In addition to providing legal representation in court, Mrs. Ostovitz provides mediation services to help families come to a fair and legally-sound conclusion outside of the traditional court proceedings.




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