Divorce After 50: When One Retirement Plan Must Support Two Futures

‍ Recent coverage by publications such as The Wall Street Journal and AARP has renewed attention on “gray divorce”—divorce involving people over 50. From a matrimonial lawyer’s perspective, the key question is how divorce later in life reshapes the financial picture.

‍While the divorce rate among adults over 50 has largely leveled off, older adults now make up a larger share of divorced Americans. Research highlighted by Bowling Green State University found that the percentage of adults age 65 and older who are divorced has tripled since 1990.

‍The practical problem is simple: one retirement plan may now have to support two separate futures, often when there is limited time or opportunity to rebuild.

‍One Household—and One Retirement Plan—Must Become Two

‍As in any divorce, one household becomes two. For older spouses, the same assets and income may also need to support two separate retirements.

A working spouse may face a maintenance obligation that affects when retirement is realistic, while the other spouse may have fewer years and fewer opportunities to rebuild savings. The same settlement may therefore affect each spouse very differently.

‍Equal Value Does Not Necessarily Mean Equal Security

A proposed settlement may appear equal on paper without giving each spouse comparable financial security.

A retirement account and a house with the same stated value, for example, are not economic equivalents. Retirement distributions may be taxable; a house carries costs and may leave a spouse with equity but insufficient cash flow.

Determining what is “equitable” requires more than comparing appraised values. The parties should consider taxes, liquidity, income production, future expenses, and risk.

Retirement Benefits Require More Than a Formula

Retirement benefits may include 401(k) accounts, IRAs, pensions, government plans, union benefits, military retirement, deferred compensation, and other employment benefits. They are not divided in the same way.

In New York, the marital portion of a pension is often determined using the formula associated with Majauskas v. Majauskas. But the formula is only the starting point. Before settlement, counsel should understand how the benefit will actually be divided, including payment status, irrevocable elections, loans, gains and losses, cost-of-living adjustments, and survivor rights will be handled, and what happens if either spouse dies before payments begin.

A QDRO may also be required to divide an employer-sponsored retirement plan. The U.S. Department of Labor cautions that an ERISA-covered plan may be unable to pay benefits directly to a former spouse without a valid QDRO, even if the divorce judgment awards that spouse a share. The agreement should address key terms before signing, including payment status, irrevocable elections, loans, gains and losses, cost-of-living adjustments, survivor rights, and what happens if either spouse dies before payments begin. Pension survivor benefits require particular attention. Awarding a former spouse part of a pension during the participant’s lifetime does not necessarily protect that spouse if the participant dies first, and survivor coverage may reduce the monthly benefit.

This can create a genuine settlement tension: one party may want to maximize current retirement income, while the other wants protection after the participant’s death. That issue should be resolved expressly, not left until the QDRO is prepared.

A pension or QDRO professional should often be consulted before—not after—the settlement is signed.

Social Security Still Matters, Even Though It Is Not Divided

Social Security is not divided as marital property. Nevertheless, it remains relevant to each spouse’s post-divorce income and, where applicable, the maintenance analysis.

Under current Social Security Administration guidance, a divorced person may qualify for benefits based on a former spouse’s earnings record if the marriage lasted at least ten years and other eligibility requirements are met. Such a claim ordinarily does not reduce the former spouse’s benefit.

Those benefit estimates can be important in evaluating whether a proposed settlement is workable.

Maintenance and Retirement Should Be Addressed Together

Maintenance can be more complicated when one or both spouses are approaching retirement.

The parties may disagree over when retirement is reasonable, what income will be available afterward, and how pension or investment income should be treated. A higher-earning spouse may expect to retire at a particular age, while the recipient may be relying on maintenance for longer.

Depending on the circumstances, the agreement may need to address modification, retirement, death, and whether the obligation should be secured by life insurance or another asset.

If life insurance will secure support or another obligation, the agreement should specify the required coverage, duration, cost responsibility, and what happens if coverage is denied or becomes cost-prohibitive.

Estate Planning Should Be Revisited

Later-life divorce often involves competing goals. One spouse may prioritize maximizing income during retirement, while the other may want to preserve assets for adult children.

Those differences can arise with pension survivor elections, life insurance, retirement-account beneficiaries, trusts, and the marital residence. An informal understanding that a spouse will “leave the assets to the children” is not a substitute for an enforceable agreement and coordinated estate plan.

New York’s automatic orders also restrict certain transfers and changes while a matrimonial action is pending.

After divorce, wills, trusts, powers of attorney, healthcare directives, life insurance, and account designations should be reviewed. Although New York law may revoke certain dispositions to a former spouse upon divorce, statutory defaults are not a substitute for confirming that every document and designation reflects the client’s intentions.

Resolve the Details Before Signing

Before settlement, counsel should have complete information about retirement plans, pension elections, Social Security estimates, real estate, debt, insurance, projected income, and post-divorce expenses. Depending on the case, a pension specialist, accountant, financial adviser, appraiser, or estate-planning attorney may also need to be involved. The goal is to resolve the financial details before the agreement is signed, not after problems arise.

‍ Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Every case is fact-specific, and readers should consult with an experienced matrimonial attorney and, where appropriate, a retirement, pension, QDRO, financial, or tax professional before making decisions about divorce, retirement benefits, or settlement terms. ‍