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How can divorce affect your retirement plans?

On Behalf of | Apr 28, 2020 | Property Division

The hope for all couples who get married is to have a long, healthy and joyous relationship until they finally can settle down to a comfortable retirement earned through the savings, investments and retirement benefits they worked hard to accumulate.

However, more couples over the age of 50 are getting divorced than ever before. When divorce enters the picture, suddenly each partner has to focus on their own needs for the future, and they must think about dividing their retirement savings as well as other assets.

Retirement-related issues to consider

When a so-called “gray divorce” happens, it’s typically at the end or close to the end of both parties’ earning abilities. Now, the assets that were intended for both must be divided. Here are some issues to consider:

  • Will you need to postpone retirement?: Unless you have a postnuptial or prenuptial agreement detailing that your pension or other retirement accounts are separate property, these accounts are considered marital assets and will be divided. Will you need to keep earning to rebuild your savings?
  • Living expenses: The cost of living may well go up when living apart from your former spouse. You may have to pay child or spousal support, or insurance premiums for your ex. Consider all the other expenses that are likely to arise.
  • Will custody issues limit where you live?: If you have minor children, will your custody arrangement restrict your ability to retire to another state? If moving means spending less time with your kids, you may want to reassess.
  • Will Social Security affect support payments?: For couples married for at least 10 years, spouses can receive Social Security benefits based on their former’s spouse’s earnings. Minor children can also receive payments until they reach the age of majority. Understanding who is eligible for these benefits and how much can affect child and spousal support.
  • Consider a QDRO for retirement accounts: A Qualified Domestic Relations Order dictates how pensions, 401(k)s, IRAs and other retirement assets are distributed, including how much each spouse will receive and for how long. They may also be necessary to avoid taxes or penalties for accessing those funds before retirement.

Protect your financial future

Getting a fair and equitable amount of marital assets is one of the chief concerns during a divorce. Dividing retirement assets can be complicated, and the process can be even more challenging when a business or other complex assets are included. An experienced family law attorney here in Massachusetts will protect your interests and work diligently for the best possible outcome.