How to Get Your Retirement Back on Track Post-Divorce

When long-term marriages end, retirement plans are often casualties. With the right steps, however, you can mitigate the damage and work toward the retirement you envisioned.

Ensure You Receive Retirement Assets Earned During Marriage

If your former spouse has a 401(k), pension, or other employer-sponsored retirement plan, make certain you file for your share. This requires a qualified domestic relations order (QDRO). An expert explains that QDROs allow non-participants access to payments. Have an actuary draft the QDRO to avoid potential rejection by the plan administrator over complex technicalities.

Once funds are withdrawn, you may roll them into an IRA or other account without penalty. This allows the assets to continue growing tax-deferred. However, some may need to use funds for immediate expenses instead. Carefully weigh options before acting.

Understand Social Security Benefits Still Available

Even after divorcing a spouse of 10+ years, you can receive retirement benefits if unmarried. You qualify for up to 50% of your spouse’s benefit amount at full retirement age. Although reduced, you may claim spousal benefits as early as age 62 if your ex has filed. However, they must be at least 62 before benefits commence. Check requirements for application and details on how monthly payments are calculated.

Inventory All Assets

Experts emphasize the need to fully account for assets after divorce. While settlements outline distributions, changes may require you to take greater control. Thoroughly review investments, savings vehicles, and account balances. Become knowledgeable on tax treatments of withdrawals. Work with financial professionals to maximize any lump sum payouts or periodic distributions you receive.

Craft New Retirement Blueprint

With altered finances, revisit retirement models to ensure feasibility. Adjust principal, income, and withdrawal rates applied to savings based on updated assets and an individual life expectancy. Review and revise asset allocation in investment portfolios based on age, risk tolerance, and retirement timeline.

Add and Adjust Savings

Contribute to emergency funds and retirement plans post-divorce. Budgets must account for sole household expenses plus discretionary savings. Experts suggest savings rates between 10 and 15 percent of income. Enlist financial planners to select vehicles and strategies to meet revised retirement goals. Company matches through 401(k)s remain ideal options. IRA contributions allow tax-advantaged growth as well.

Adapt Lifestyle Realistically

Lifestyle changes may prove necessary, as divorced households face greater costs. Experts urge practicality when crafting long-term plans. Downsizing homes, limiting vacations, and dining out less all create extra margins to bolster your savings. While this is difficult for some, first reframe these adjustments as opportunities for gaining control of your finances. Divorce can take you from a victim mentality to a survivor mentality with the right attitude, experts say.

In this issue:

Required Minimum Distributions: What Retirees Need to Know for 2024

What Exactly Are No-Deductible Health Plans?

How Life Changes Impact Your Life Insurance Needs

Grow Your Nest Egg Tax-Free with a Roth IRA

How to Get Your Retirement Back on Track Post-Divorce

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