You might think that the promise of endless relaxation can only benefit your marriage. But without work to distract you, long-simmering marriage problems can finally boil to the surface. Divorcing in retirement puts half of your assets up for grabs, making it one of the riskiest financial decisions you can make. No matter how much therapy costs, it’s almost always a safer investment than divorce. If your marriage has crumbled and you see no way to save it, here’s what you need to know about how divorce can affect your retirement.
Everything is Up for Grabs
It doesn’t matter who is at fault, how good your lawyer is, or how little you think your ex deserves. A divorce puts all of your assets up for grabs—including your home, cars, bank accounts, and retirement accounts. Your net worth can easily be cut in half, so if your retirement accounts are barely enough to fund your retirement, you may want to reconsider your divorce plans.
Of particular note is alimony. If one spouse raised children while the other worked outside the home, courts almost always grant alimony—often for many years. You could end up paying your spouse for years to come, so plan accordingly.
A Second Marriage Can Put Your Assets on the Line
Think a second marriage might be the solution to all the boredom you experienced before? Think again. A second marriage can be just as damaging to your bottom line as a long-term marriage. So before you commit to marital bliss again, get a prenup. And if you’re already well into your second marriage and considering divorce, remember that your spouse is entitled to just as much as your first spouse was.
Your Home is Probably Worth Fighting Over
Most people’s homes are their most valuable assets. If your children have already moved out and you don’t need a lot of space, you might consider letting your home go—particularly if you still owe mortgage payments. Think twice before making this decision. Your home can be a source of emergency cash in retirement. Seniors over the age of 62 who own their own homes can access funds through a reverse mortgage. You don’t have to repay the loan until you move, which means your home might be worth fighting over. If you already have a reverse mortgage, a divorce may affect payment.
Because assets are generally divided roughly evenly, know that keeping the house may mean giving something else up—a car, a boat, a vacation home, even your bank account. It might also require you to take on some debt, since your spouse might trade the house for a debt-free personal ledger. Consider what you’re willing to trade for the security remaining in your home offers, then offer that as leverage early in the divorce process.
Support for Third Parties Could End
It’s common for parents to continue supporting their children well into adulthood. Some couples also help fund living expenses for elderly parents. A divorce can change this. Splitting up will reduce your assets, potentially impeding your ability to support others. If your spouse is the person supporting your children or parents, consider that a divorce decree cannot require this support to continue. The only way to guarantee support for third parties is to seek sufficient spousal support to enable you to directly support your loved ones.