Married couples often spend years saving together, partially with the aim of being able to afford retirement. It is easier to maintain an independent household without full-time income when two people save together and share their expenses. Those considering divorce after years of marriage and when in their 50s or beyond may have to think about their retirement plans carefully.
Divorce can negatively impact retirement preparations in two distinct ways. First, each spouse must establish their own household, which is likely to significantly increase the overall cost of retirement. Secondly, people have to divide what they have saved for retirement, which means they have fewer resources to pay their expenses.
Do people have to worry about a major change to their retirement plans if they divorce?
Savings are typically divisible
People generally need to understand the rules for property divisions so that they can realistically assess what resources they have to support themselves after the divorce. Retirement savings and pensions accrued during a marriage are usually subject to division when people divorce. However, actually splitting accounts is not always necessary. Some people are able to reach settlements where spouses may use other resources to offset their retirement savings. Some people may work a few extra years to rebuild what they have to withdraw from the account. Others may adjust their retirement plans or their investment strategies to work around the division of their retirement savings or pensions.
Certain benefits may still be available
Many older adults rely on a combination of private savings and government programs to ensure their stability during retirement. Both Medicare and Social Security retirement benefits are potentially available to dependent spouses after a divorce. Provided that a marriage lasts at least 10 years, someone who depended on their spouse during the marriage could potentially qualify for Social Security or Medicare even after a divorce. The claims of a dependent spouse typically do not diminish the benefits that the wage-earning spouse can receive.
While those preparing for gray divorce often need to think carefully about their expectations for retirement and how to budget after dividing their property, retirement is still an achievable goal. Having the right support can make it easier for those facing gray divorce to move on happily afterward.