Gray divorce, the term for divorce among couples over the age of 50, brings with it a unique set of challenges. One of the most significant concerns for individuals in these cases is how the division of assets will impact their retirement savings, including Social Security benefits and pension plans.
Social Security benefits and gray divorce
When a couple divorces after many years of marriage, both parties may be entitled to Social Security benefits based on their spouse’s work record. To qualify for spousal Social Security benefits, the marriage must have lasted at least 10 years. The spouse can claim up to 50% of the other’s benefits if they are not remarried. If the ex-spouse is entitled to a larger benefit, they can opt for that instead of their own. However, the claimant’s decision may be affected by the timing of the divorce and whether they remarry.
If both individuals are still working, they may also face the decision of how best to contribute to their own Social Security benefits, knowing that their future payouts may be significantly impacted by the loss of a combined household income.
Pension plans and gray divorce
In a gray divorce, pensions may be one of the largest assets to divide. In many cases, one spouse may be entitled to a share of the other’s pension plan if they were married during the years of contribution. This is typically determined through a qualified domestic relations order (QDRO), which legally splits the pension.
Both spouses may need to work with financial professionals to understand the impact of pension division, especially when one or both parties plan to rely on this income for retirement.
Planning for the future after a gray divorce
Gray divorce often requires revisiting retirement plans to ensure financial stability. It is crucial to consult with an attorney and financial advisor to protect Social Security and pension rights while managing assets effectively after a divorce.
