You thought you’d spend the rest of your life together with your spouse, including your retirement years. Now you’re ready to divorce and start a new life.
But starting a new life isn’t easy. You may be thinking about the following questions:
- How will divorce affect my ability to retire?
- Will I have to work longer in order to retire if I get a divorce?
- Will money always be a stressor post-divorce?
If your spouse handled all the finances, you may not even know where to begin to find answers to these questions. And if you were a stay-at-home parent, you have the disadvantage of being out of the job market.
Depending on the length of your marriage and your age, divorce can have either a significant or small impact on your retirement.
Usually, there are three major ways a divorce can directly impact your retirement.
Spousal Social Security Benefits
If you were a stay-at-home parent, you likely haven’t had the opportunity to build up Social Security credits that make you eligible to receive Social Security benefits. If you were to have stayed married, you would have received spousal benefits based on your spouse’s work history.
However, if you divorce, there are specific conditions that must be met to retain Social Security benefits based on your prior spouse’s work history.
First, you must have been married to your spouse for at least 10 years. If you are close to the 10-year mark, but haven’t reached it yet, you may want to consider delaying your divorce. This is especially true if you are older.
The second condition that must be met is that you must remain unmarried when you start to collect Social Security benefits based on your ex-spouse’s career. If you get divorced at a younger age and expect to remarry, you will not want to expect to get Social Security benefits from your ex-spouse.
Alimony May Change During Retirement
Under South Carolina law, Periodic (permanent) alimony can be adjusted due to a “change of circumstances.” Retirement could be considered a change of circumstances that could trigger a hearing on whether alimony payments will be modified or stopped completely.
Depending on the exact details of the case, the spouse paying alimony may be able to pay less alimony once they retire.
South Carolina law gives judges six guidelines to consider when determining whether to modify alimony payments due to retirement, including:
- whether retirement was contemplated when alimony was awarded;
- the age of the supporting spouse;
- the health of the supporting spouse;
- whether the retirement is mandatory or voluntary;
- whether retirement would result in a decrease in the supporting spouse’s income; and
- any other factors the court sees fit.
Negotiating The Splitting of Retirement Plans During Divorce Mediation
Your divorce will also affect how your retirement. Existing retirement plans may be divided during the property division process.
If you and/or your spouse have retirement accounts (like a 401k or a pension), you will need to negotiate how to split them fairly. Some factors to consider are:
- How long were you and your spouse married?
- What were the balances of the accounts before you got married? It would be fairer to only divide money that was contributed during the marriage.
- How were other property division issues handled? You can bargain to get other property you want by giving up your shares in a retirement plan. Alternatively, you may want to hang onto a greater portion of your retirement account in exchange for a lesser amount from the equity in the house or some other asset.
Splitting a retirement plan will usually involve the filing of a legal document called a QDRO (Qualified Domestic Relation Order) for private retirement plans. For public retirement plans (usually government workers), you will need a DRO (Domestic Relations Order).
A QDRO/DRO will result in certain tax implications, so it’s best to discuss with both a financial adviser and your Charleston mediator before finalizing any agreement about your retirement.
Choose Mediation And Take Control Of Your Divorce
If you choose to divorce via mediation instead of the court system, you can decide how retirement accounts will be split. You may even be able to choose to give up parts of your share in a retirement account so you can obtain other things you value more when it comes to property division.
If you want to get divorced without the courts at an affordable rate, our Charleston Divorce mediators can help you do it. Call our office today to discuss your options.
About Kenneth Peck
Kenneth Peck is a certified Charleston Family Court Mediator with more than 40 years of experience as a divorce attorney. He uses his knowledge and experience to guide couples in negotiating divorce settlements so they can save money, complete the divorce process quicker, and get better outcomes than they would at trial.