How to Navigate Divorce and Retirement

Maintain Your Retirement Plans Following a Divorce

If you’re about to get a divorce, it’s highly recommended that you take steps that will allow you to continue to adhere to your retirement plans. In 2019, nearly 750,000 couples divorced, most of which had to deal with division of assets. Once assets have been divided, you may find that you have less money for your retirement than you anticipated, which is a common issue that can be properly mitigated.

Consider Selling Your Home

If you’re over 50 and seeking a divorce, one of the first decisions you could make once the divorce is finalized is to sell your home. The average drop in household income following a divorce can be anywhere from 20% to 45% for each spouse, which means that you’ll no longer have access to the same amount of funds you did before. As such, you may be unable to cover your current monthly expenses on your own.

If you own a large house, selling the property would allow you to obtain a sizable sum of money that can be placed in savings or used to purchase a smaller home with lower monthly expenses. While staying in your current residence may be a more comfortable and convenient option, it’s possible that you would lose the opportunity to build your retirement funds in the future.

Let’s say that the change you make to your living situation results in a reduction of your monthly expenses by $400. If you gain a 5% return on your investment with $400 in monthly savings, you would be able to add nearly $63,000 to your retirement savings after 10 years. These savings could also be used to expand your investment portfolio. Some of the more low-risk investment opportunities to think about putting your money into include:

  • Real estate investment trusts
  • Preferred stock
  • Annuities
  • Dividend-paying stock
  • Alternative investment funds

It’s also possible to place these savings directly into a 401(k) or IRA. The annual contribution limit for a 401(k) in 2021 is set at $19,500. As for an IRA account, the contribution limit has been set to $6,000 for 2021.

Take Income and Social Security Into Account

While a divorce case is ongoing in New Jersey, it’s possible for spouses to negotiate their own divorce terms before the case is taken to a judge. When negotiating, it’s important that the division of assets and property is equitable. Some of the factors that are used during property division include:

  • Length of marriage
  • Earning power
  • Work records
  • Age

If you and your spouse are unable to reach an agreement about how your assets will be divided, the judge who oversees your case will decide how to distribute assets and property. In the event that your retirement is set to occur in the near future, consider focusing on financial assets that are able to generate sustainable income. Keep in mind that any money you distribute into your 401(k) or IRA account will likely be taxed.

As for Social Security, you can start receiving Social Security payments at 62 years old if you’ve paid a certain amount of taxes over the years. The amount of Social Security benefits you receive depends on what your Social Security payment is supposed to be and what your spouse’s payment is.

If your full benefit is less than 50% of what your spouse is set to receive, you can switch to 50% of your spouse’s benefit instead. Keep in mind, however, that you must be married for at least 10 years to qualify for this arrangement. Being able to receive higher Social Security benefits will be helpful during retirement and can assist you in bolstering your retirement funds before you stop working.

In the event that you and your spouse have IRA accounts, pensions, and insurance policies, all of these assets will need to be distributed evenly, which can be very complicated. To that end, it’s highly recommended that you hire a reputable New Jersey divorce attorney who can help you navigate the property division process without arguments becoming too heated.

Make Sure That Everything Is Properly Divided

As touched upon previously, all of your assets will need to be divided. Once an agreement has been made between both spouses, actually dividing the property is important. The final divorce decree only states which spouse gets what. If you wait too long to claim the assets you’re owed, you may find that they aren’t worth what you expected them to be.

For instance, you may be owed a portion of your spouse’s IRA or 401(k) account. In this situation, your spouse could borrow money from the 401(k) or choose to invest in the 401(k) without you having any control over how these decisions are made. To have control over these assets, they must first be transferred to you, which is why it’s highly recommended that you don’t take too long to start claiming your assets.

Develop a Comprehensive Estate Plan

Likely the most important thing you should do before you even obtain a divorce is to create a comprehensive estate plan. However, an estate plan can still be made even after the divorce has been finalized. While estate planning is mainly helpful at making sure that your assets are properly distributed after you’re gone, having an estate plan can make your retirement easier.

For instance, proper estate planning ensures that you’re eligible for various government benefits once you reach retirement age, the primary of which is Medicare. With Medicare, your overall medical costs will be reduced substantially, which allows you to keep more money in savings.

While a divorce often causes people to become distracted because of the heightened stress, it’s important that you don’t lose sight of your retirement plans. Even if you only temporarily forget about your retirement plans, you could end up making mistakes that cost you thousands of dollars that you can’t get back.

Obtain Assistance From Our New Jersey Divorce Attorney

If you want to make sure that assets are divided properly and that the final results of your divorce are fair and equitable, you should think about hiring our divorce lawyer in New Jersey. We can help you navigate every stage of the divorce process, which involves signing paperwork, handling negotiations between you and your spouse, and potentially representing your case in front of a judge.

Because of all of the stress and frustration that naturally accumulates during divorce proceedings, having an experienced divorce attorney by your side may be able to relieve some of your stress and keep you focused on what happens after your divorce. If you’re currently making consistent monthly payments to a 401(k) account, it’s essential that you continue making these payments even after your divorce.

Since our attorneys handle the entire divorce process, you can put your attention elsewhere and make sure that you maintain your retirement plans. While the divorce case is ongoing, our legal representation can extend to all issues that might arise during the case. These issues relate to subjects like:

  • Childcare
  • Spousal support
  • Child custody
  • Stepparent adoption proceedings
  • College education planning

If you’re ready to seek a divorce and believe that now is time to start the proceedings, call our New Jersey divorce lawyer today at (201) 343-0078 or email us at to set up your first consultation. This 30-minute phone consultation is completely free and should help you determine if our legal representation is right for your case.

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