People typically spend decades setting aside money for retirement and establishing eligibility for key benefits. Workers in a variety of fields may have private retirement saving funds or pensions. Sometimes, their employers match their contributions to 401(k) accounts. They may also be eligible for both Social Security retirement benefits and Medicare insurance coverage because of their work history.
When people start thinking about a gray divorce in their 50s or beyond, their financial stability during retirement is often a top priority. They may worry about whether they can retain crucial resources after a divorce to ensure their financial stability during their retirement years.
What typically happens to retirement resources in a gray divorce scenario?
Pensions and savings are subject to division
Sometimes, people enter a marriage after signing a prenuptial agreement. Spouses do sometimes agree to set aside pensions or retirement savings as separate property in the event of a divorce. Without a pre-existing agreement, those resources are at risk of division. Any contributions made during the marriage may be subject to division in the divorce.
Spouses may need to divide a 401(k) or negotiate a way to address a pension as part of their divorce proceedings. Either dividing an account or arranging for ongoing financial support can be reasonable solutions when addressing retirement funds in a pending divorce.
Both spouses can often receive benefits
It is quite common for one spouse to earn more than the other. They may qualify for better Social Security retirement benefits or may be the only spouse who technically qualifies for Medicare. Thankfully, there are rules in place that specifically regulate both Social Security retirement benefits and Medicare coverage.
The same basic rule applies in both scenarios. Essentially, if the marriage lasted for at least a decade, then the dependent or lower-earning spouse may qualify for benefits after the divorce. Someone who is not eligible for Medicare based on their own work history could qualify for Medicare through their spouse’s employment.
They can also qualify for Social Security retirement benefits or may be eligible to supplement their lower Social Security benefits based on their spouse’s employment history. A claim by a lower-earning or dependent spouse does not eliminate or reduce the benefits available to the higher-earning spouse.
People who understand what divorce may mean for their retirement resources can feel more confident as they prepare for divorce proceedings. Dividing retirement resources may diminish what someone has available, but they can still count on key forms of support even after a divorce.
