Gray Divorce Nearing Retirement

Weighing Your Retirement Options

Retirement savings is a significant issue in divorce. It often makes up a substantial amount of a marital estate, particularly for couples who have been married for twenty or more years. However, most spouses realize the financial impact on retirement once it is almost too late.

Generally, a two-income household works to save retirement funds for the couple to retire together and, therefore, budget accordingly. When this couple divorces, those plans go entirely out the window. They must plot a new path forward where each spouse has a residence, fixed expenses, and some “play” fund. With essentially half the proposed saving, the revised plan will be much different than imagined.

In a household with only one income, the spouse not earning income must rely on the other spouse’s savings. Without it, that spouse faces a potentially dire financial future at retirement. 

For a relatively younger married couple, retirement often seems very far away. As a result, who gets what percentage of the total retirement savings at divorce might not be the most important decision. Why? Because both spouses will most likely have enough working years left to establish significant savings for retirement. However, dividing retirement savings takes on much greater importance at divorce for a couple who has been married for over twenty years and is now approaching retirement age. Determining your percentage of the retirement savings portion of the marital estate can be complicated. We must discuss and consider your and your spouse’s current age, employment, employability, work history, and health. For example, if you have been married for at least 10 years, you can claim partial Social Security benefits using your former spouse’s work history once you reach age 62. Full Social Security benefits are available once you reach the retirement age set by federal guidelines. 

We need to consider your expected monthly income, expenses, and whether you will receive or pay spousal maintenance. We must also consider other benefits you may need before you can safely decide whether to retire. For example, you might need to continue working to retain your employer-based health insurance benefit. You also must evaluate whether you can continue to work and, if so, in what capacity as it relates to your post-divorce goals.

Is Delaying Retirement a Good Choice?

The simple answer is “it depends.” Some at this age no longer want to work and wish to enjoy their retirement years. However, some may not be able to afford their retirement lifestyle post-divorce without working. If you lost a significant portion of retirement funds in the divorce, you might want to work additional years and take advantage of favorable laws that allow persons over 50 to save more in retirement plans such as 401(k) plans and Individual Retirement Accounts (IRAs). Working for longer will allow your retirement investments to continue to grow before disbursements begin. It can also increase the retirement benefits available to you through Social Security.