If you are getting divorced, you know that a key part of the process is the division of assets. In Georgia, assets acquired during your marriage, including your pension and 401K benefits, are subject to equitable distribution. What happens if you are involved in a military divorce with a gray area retiree?
Division of Military Retirement in Divorce
Military retirement benefits are considered a valuable marital asset in most divorce cases. The well-established Uniformed Services Former Spouses Protection Act (USFSPA) allows state courts to treat a portion of a military pension earned during the marriage as marital property, subject to equitable distribution. However, gray area retirees present a unique situation.
These individuals receive a form of retirement pay known as "retired pay for non-regular service" or "continuation of pay." This benefit is often less than traditional military retirement pay and may not begin until the retiree reaches a specific age.
Who Is Considered a Gray Area Retiree?
A gray area retiree refers to a member of the United States military reserve components who has completed 20 or more years of service, which qualifies them for retirement benefits, but who is not yet of age to receive military retirement pay. The age threshold is set at 60 years old.
Thus, while gray area retirees have completed their service commitment and are recognized for their contributions, they must wait until reaching the qualifying age to receive their retirement pay and certain other benefits. Upon reaching the age of qualification, these retirees become eligible to receive their retirement pay and additional benefits, such as healthcare through Tricare.
It is important for gray area retirees to plan for this period of deferred benefits, considering both the limitations and opportunities it presents. While awaiting eligibility for full retirement benefits, many take the opportunity to pursue civilian careers or further education, leveraging their military experience and skills in new contexts.
How This Gray Area Can Impact Equitable Distribution
The gray area can significantly impact a spouse's potential share of military benefits in an equitable distribution state. The specific impact of one party not having full access to their benefits include:
- Reduced value. Since the retirement pay received by a gray area retiree is often lower than traditional military retirement, the spouse's potential share is automatically reduced.
- Receipt of full benefits. The military spouse will also likely not ever receive a share of the full benefits once the retiree reaches age 60, as those assets will have been obtained after your date of separation. However, depending on the specific circumstances, exploring alternative settlement options such as a lump sum payment based on a projected future benefit value could be beneficial.
- Treatment of gray area pay. Courts may not consider the "gray area" pay as a marital asset if it wasn't earned during the marriage. This can further limit the spouse's share.
Spouses divorcing gray area retirees can also face additional challenges:
- Increased litigation. The ambiguity surrounding the treatment of "gray area" pay can lead to prolonged and expensive litigation to determine the spouse's rightful share. While spouses may consider mediation or a collaborative divorce, those proceedings may also be a bit lengthier if agreeing on whether or not to divide future benefits is difficult.
- Financial strain. A lower settlement or prolonged legal battles can place a significant financial strain on the divorcing spouse, particularly if they are financially dependent on their partner's military income.
Financial Planning for Post-Retirement & Post-Divorce Life
Divorce can significantly alter the financial landscape for gray area retirees and their soon-to-be ex-spouses, making it essential to revisit financial plans and retirement readiness. The division of retirement benefits, potential changes in income, and new expenses such as alimony or child support can all impact a retiree's financial future. It's a time to reassess financial goals, budgeting, and investment strategies to ensure that retirement remains on track.
Gray area retirees may also need to consider additional savings or employment to bridge the gap until they can access their military retirement pay. Preparing for full retirement benefits post-divorce involves more than just financial considerations; it's also about adapting to a new way of life.
Financial planning during this time should be comprehensive, taking into account both short-term needs and long-term retirement goals. With thoughtful planning and professional guidance, gray area retirees can navigate the financial complexities of divorce and emerge with a solid plan for their future.
We Can Help with Your Military Divorce
As you consider the implications of divorce on your military retirement benefits or wonder what benefits you may be entitled to when divorcing a military spouse, the attorneys at Balbo & Gregg, Attorneys at Law, PC stand ready to offer you comprehensive counsel. We have extensive experience in helping clients navigate military divorces as well as the division of military retirement benefits, and our experienced team understands the unique circumstances faced by gray area retirees and their spouses.
When you retain our services, you can trust that we are committed to helping you protect your rights and secure your financial future. If you're in the midst of a military divorce or planning for retirement in the city or state, don't hesitate to reach out to us.
To request a free consultation, call (866) 580-3089.