Yes, a divorce can affect your retirement. It is important to plan ahead so that this next stage in your life can still go smoothly, even after your marriage ends.
One thing to keep in mind is that there has been an increase in late-in-life divorce cases in recent years. Couples who are getting divorced in their late 50s or 60s are naturally closing in on retirement age.
This can complicate things if they have been saving jointly to retire and counting on using shared resources. They have to reconfigure what retirement is going to look like after their assets go through property division. A couple that gets divorced in their 30s still has decades to plan, but an older couple may not have much time to independently plan for retirement.
Splitting up retirement benefits
One key component to consider is that retirement benefits can often be divided during a divorce. Those benefits were earned during the marriage, so even if they were only earned by one spouse, they could still qualify as a marital asset.
Naturally, neither person has access to the benefits at the time of the divorce, since they have not yet retired. But they can take steps, such as using a qualified domestic relations order, to govern the future division of those benefits. The QDRO will assign a percentage of the benefits to each person, which has to be followed once they are paid out.
It is very important to take steps in advance to address both property division and retirement planning. Those going through a divorce must know what legal options they have.
