A comfortable requirement requires various sources of support. People need resources of their own that can help pay for certain expenses. They require ongoing income, medical benefits and a stable place to live. Married couples often work together to ensure their stability and comfort during their golden years. They save money together and may rely on one another’s benefits. They also plan to limit their costs by sharing a household.
When people close to or past the age of retirement decide to divorce, they often worry about the financial implications of that decision. Generally speaking, spouses have to divide their assets when they divorce. What happens to retirement resources such as pensions, retirement savings accounts, investment accounts and benefits when spouses go their separate ways?
Financial accounts and pensions are often divisible
Some people accrue pension benefits with their employers through years of hard work. Professionals at various private companies may have a pension that can ensure their comfort during retirement. Military servicemembers also accrue pension benefits through years of dedication. Others may save money privately for retirement. They may fund 401(k)s and similar accounts. People may also fund investment accounts not associated with their employment.
Generally speaking, pension benefits accrued during marriage, investment accounts funded with marital income and retirement savings accounts are all potentially subject to division during a divorce. Spouses may need special documents to avoid taxes and penalties in such cases.
Benefits can be shareable too
There are a few benefits that people count on during retirement. Most professionals have made Social Security contributions that make them eligible for retirement benefits. Working adults can also receive Medicare coverage that pays for some of their health care costs.
Those who earned less than their spouses or who stopped working to care for the family might worry about their eligibility for Social Security retirement benefits or Medicare benefits. The good news is that both of those programs take divorce into consideration.
Individuals who may qualify based on a former spouse’s employment are still eligible for Medicare after they divorce. So long as the marriage lasted at least 10 years, dependent spouses can qualify for Medicare based on a wage-earning spouse’s employment.
Similar rules apply to Social Security retirement benefits. Lower-earning spouses can supplement their earned retirement benefits by making a claim based on a former spouse’s employment. Non-working spouses can qualify based on the employment history of the wage-earning spouse. Claims by lower-earning or dependent spouses do not diminish what wage-earning people receive in Social Security retirement benefits.
Discussing current resources and retirement goals with an attorney can help people understand what to expect during a divorce. With the right paperwork and appropriate attention to detail, it is possible to retire comfortably even after divorce.