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How your divorce can dictate when you retire

On Behalf of | Sep 28, 2021 | Family Law |

A few years ago, researchers with Boston College’s Center for Retirement Research set out to understand what impact a person’s decision to divorce might have on their ability to retire. The researchers determined that a worker who chooses to end their marriage as they near their retirement has a significant impact on their financial future moving forward. 

The researchers explained why divorcing spouses find it challenging to hold on to their retirement accounts after property division negotiations in their divorces. 

How much does divorce impact a future retiree’s finances?

Study researchers analyzed data compiled by the National Retirement Risk Index. They discovered that only approximately 50% of married spouses can afford the same expenses in retirement that they could afford while working. The researchers estimate that divorce would decrease their financial stability by 7%.

The researchers also pointed out how financial crises only exacerbate a divorced spouse’s ability to cover their expenses post-retirement. They noted that the 2008 recession, for example, reduced people’s abilities to afford their lifestyle either after divorce or post-retirement by 2%. 

Why does divorce so significantly impact financial prospects?

Many people keep working until they’ve accumulated what they believe will be enough in their retirement fund to cover their basic expenses in the future. They generally haven’t saved enough to be able to withstand losing a significant portion of the funds in their 401(k) or other retirement accounts, which is a reality someone may face depending on how property division discussions go in the divorce. 

Study authors noted that the costs that tend to be most financially debilitating for divorcing spouses of retirement age are child support or alimony, legal fees and real estate transaction costs. 

The researchers discovered that some of the most crippling costs that divorcing spouses struggle with near retirement are real estate transaction ones, legal fees, alimony and child support. You can take steps to negotiate a settlement in your divorce that will help protect your financial future as you head into retirement. You’ll want to take time to learn about these to ensure you don’t have to live off less than what you expected. 


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