Ending a marriage can shake up your immediate personal and financial plans. Without proper planning, divorce can also impact your life many years in the future by depleting your retirement savings.
Divorce and retirement savings
Undergoing divorce may be costly, make it harder to save money and reduce household income and savings to pay for support. Household income usually drops because one wage earner now pays for the expenses that were paid by two salaries before the divorce.
Divorced people have less money in their individual retirement accounts than married people, according to the National Institute for Retirement Security. The mean value of independently owned defined contribution accounts is $84,874 for married men and $50,126 for married women. These values drop to $58,951 for divorced men and $38,613 for divorced women.
Married couples also have more household retirement money. The mean value of a household defined contribution accounts is $136,055 for married men and $58,951 for divorced men.
Divorced women fare worse than divorced men with their retirement savings. But women who divorce earlier in life do better than those who end their marriage later because they have more time to add to their retirement savings.
Steps to protect savings
There are many ways that can help you protect your savings. First, consider Social Security spousal benefits. A spouse who was married for at least 10 years may be eligible to spousal or survivor benefits ever after their divorce. If your former spouse was the higher earner, you should find out whether claiming benefits on their work record can help you get higher Social Security
You also need to place a priority on retirement savings by rebuilding your budget after divorce. Note your account balance, set a savings goal based upon retirement without a spouse, and make automated account contributions to meet your goal.
Making wise investments can also help grow your savings. You should learn investing fundamentals, especially if you relied on your spouse for investment decisions.
An attorney can help develop options on support and property division that meet your financial needs. Lawyers can also protect your interests in court and settlement negotiations.
