PERSONAL FINANCES: Saving for retirement in case of divorce later in life

PERSONAL FINANCES: Saving for retirement in case of divorce later in life

Ending a marriage can be emotional and challenging at any age, even if both parties agree it’s the right decision. When couples over 50 divorce, they are often faced with the additional task of supporting two separate retirement plans using the assets intended for their combined nest egg. If you find yourself in this situation, the following steps can help you increase your savings so that you have enough money to last what could last for decades in retirement:

1) Take advantage of the catch-up contribution rules. If you are employed and age 50 or older, current tax laws allow you to save additional money in your workplace retirement plan or IRA. See or contact your financial advisor for the annual contribution limits for each account you have.

2) Work an extra year or two before retiring. Every extra year you spend in the workforce means you have an extra year to save for the retirement you want to have. Many Americans spend 20 to 40 years in retirement, so the extra money you save can make a big difference to how much you have to live on.

3) Delay claiming Social Security. Applying for Social Security benefits after a divorce can be tricky. Conclusion: It’s worth exploring your options and choosing the best claims strategy based on your complete financial situation. If your ex-spouse earned a higher income, you may be eligible for benefits based on their employment record from age 62. In most cases, you may qualify if you have been married for at least 10 years and are still single. If you have remarried, check the Social Security website to see if you are eligible ( If you decide to claim benefits on your ex-spouse’s case, keep the following in mind:

• You can apply for benefits even if your ex-spouse is still working. To do this, you must have been divorced for at least two years.

• The benefits you receive will not affect the amount your ex-spouse (and current spouse if remarried) will receive.

• If your ex-spouse died following your divorce, you may still be entitled to widowhood benefits. Check the Social Security website for eligibility requirements.

4) Save your child support dollars. Alimony is more likely to be awarded when long marriages end. If you are awarded alimony as part of your divorce, consider using it to boost your retirement fund. Child support is often awarded with conditions, including the possibility that payments will stop if you remarry, so keep that in mind when planning your future.

5) Keep your retirement dollars invested. In a complex situation, it can be tempting to use your retirement savings to meet immediate financial needs. However, this could jeopardize retirement when and how you want. Premature withdrawals from retirement accounts are a costly short-term solution that incurs tax penalties and fees while reducing future retirement income.

6) Ask for advice. Assemble a team of professionals who can advise you on the best way to allocate assets and plan for your future. If you have friends or family who have been through a divorce, consider asking for a referral. Hire an attorney or mediator who can help you navigate the legal system (keeping in mind that laws vary from state to state), advocate for you, and update your estate plan. Also consult a financial advisor and tax advisor for advice on developing your retirement strategy.

The emotional upheaval brought on by divorce can make it difficult to prioritize your finances, but even in the midst of it, it’s important to make wise decisions. Even if you’re looking forward to moving forward with your life, take the time to carefully evaluate your retirement plans. When you have large assets or a complex estate to distribute, the stakes are too high to rush the process.

Holley Smaldone-Cragg, CFPC, is a Financial Advisor at Ameriprise Financial in Geneva. She specializes in fee-based financial planning and asset management strategies and has been practicing for over 35 years. His website is

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