Divorce often makes people feel anxious about their financial stability. Even those with successful careers may worry about the cost of divorce and the long-term economic impact of dividing their property with a spouse.
Particularly when people are in their 40s or beyond, they may worry about how the end of a marriage could affect their retirement plans. It takes decades to properly fund retirement savings accounts and earn benefits that make retirement financially sustainable.
Many people contemplating divorce in their 40s or beyond may have questions about that process and what may happen during their retirement. People who get the answers to the three questions below may feel more confident about making a change that could lead to a happier lifestyle during their golden years.
Are retirement accounts separate property?
Frequently, spouses each fund their own retirement savings accounts. They may even receive employer-matching contributions. People sometimes assume that accounts held in the name of one spouse are their separate property, especially if they began funding the account before marriage. Usually, any contributions made during the marriage are potentially subject to division when couples divorce, as the spouses used marital income to fund their accounts. Unless there is a marital agreement stating otherwise, retirement accounts are usually divisible in a divorce.
What happens with retirement benefits?
There are two main government programs that support adults during retirement. Older adults may qualify for both Medicare insurance and Social Security retirement benefits based on their employment history. Dependent spouses and those who deprioritize their careers to support their families sometimes qualify based on the income and work history of their spouses. Dependent and lower-earning spouses can still qualify for Medicare and Social Security retirement benefits if the marriage lasted at least 10 years.
What if there is a pension in play?
There are several different ways for employers to structure pensions. Some pensions are divisible like other retirement savings accounts. The spouses may be able to directly divide the pension or address its value when splitting up other property or marital debts. Other pensions may not be divisible because of how employers structure them. In those situations, spouses may need to either factor in the long-term value of the pension when dividing other property or look into alimony or spousal maintenance as a means of addressing the pension.
In theory, both spouses can move on and eventually retire comfortably if they handle the divorce process appropriately and prioritize rebuilding their resources afterward. Learning more about property division standards can be beneficial for those preparing for divorce and hoping to retire comfortably afterward.
