Divorce: A Perfect Time To Think About Your Retirement

Posted on: 28 November 2022


It might not be second nature to consider retirement issues during divorce, but perhaps it should be. Divorce is already a time of great changes and many of those changes involve financial matters. All financial decisions made during a divorce have the potential to affect you and your children's lives for a long time to come. To find out what you should be thinking about when it comes to retirement planning and divorce, read on.

Secure Your Social Security Retirement Benefit

When retirement age is reached, you may elect to begin receiving Social Security retirement benefits. Working and earning income will result in the payment of monetary benefits based on recent work and salary data. However, those who divorce may also be paid retirement benefits courtesy of their ex-spouse.

When it's time to opt into benefits, you may choose to earn on your ex-spouse's record if they earned more income than you did. The Social Security Administration (SSA) determines how much your benefit will be and adds money to that amount to equal at least one-half of your ex-spouse's benefit. You will be paid the larger of the two benefits if you earn more than your ex, however. You may only receive one benefit so you cannot simply add your spouse's benefit to your own.

The money you earn does not affect your ex's benefit and they are not informed about the benefit. The SSA will automatically calculate the benefit if you provide them with your ex's information, dates of marriage, and dates of divorce. One big caveat, however, is that you must have been married for at least ten years to benefit from your ex's earnings record. Consider postponing your divorce if you are near the ten-year mark so that you can take advantage of this benefit and be paid the highest possible retirement amount.

Marital Property Includes Retirement Plans

Regardless of how much you have saved or failed to save for your retirement, divorce presents the parties with a way of using martial property to benefit. While not all types of retirement accounts are considered marital property, many are, including 401(k) plans. Marital property includes any funds added to a retirement account since the date of the marriage. The ownership of the plan or who added the money is irrelevant for divorce purposes.

The means to obtain your share of marital property is by way of a QDRO. The qualified domestic relations order is presented to the family court lawyer during the divorce process. The order allows for the removal of funds for marital property reasons and keeps the parties from paying penalties and fees associated with the early removal of retirement funds. The funds must be listed as income unless you roll them over into your own retirement account.

To learn more about either of these retirement issues, speak to a divorce lawyer.