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How To Stop Divorce From Ruining Your Retirement Savings

A divorce can affect your life in many ways, especially financially. Divorces can alter retirement security because the process itself can be costly, and many individuals reach into their retirement savings to pay for legal services. This means those funds are either no longer deposited into their retirement accounts because that money is needed for living or legal expenses, or monies are removed from the protections IRAs. Other retirement funds are afforded, which usually results in taxes and penalties for their withdrawal. This also means the value of future income is dissolved, which is the concept of “present value.” Present value states that an amount of money today is worth more than that same amount in the future. Thus, divorces can affect retirement savings because parties to the divorce spend money on legal proceedings now instead of keeping it in their invested retirement vehicles. As a result, it loses the tax benefits and growth it accumulated during the marriage.

“Divorces can affect retirement savings because parties to the divorce spend money on legal proceedings now instead of keeping it in their invested retirement vehicles. As a result, it loses the tax benefits and growth it accumulated during the marriage.”

In addition to missed investment opportunities, retirement savings can be more directly affected. If there is no prenuptial agreement, spouses are typically entitled to a portion of their former partner’s 401(k), Roth, pension, or other retirement accounts. While this may not be true in all states, it is the normal outcome. The division of your retirement accounts might lead to financial hardship for both parties because now, a substantial portion of the retirement account could be split when the initial plan was to retire with the full retirement account together. As we all know, it is much less expensive for two people to live together than separately. The same amount of money that could be enough for two people living in retirement together might not be enough for two people living in retirement separately.    There are several steps one can take — with proper guidance, communication, and knowledge of the law — to mitigate losses to your retirement savings.

Be As Amicable or Compromising As Possible

For many, divorce can be a very contentious process. The best option is to be as amicable or compromising as possible with your spouse when separating. If a cordial agreement can be made about the division of a retirement account, you may save yourself a lot of grief, and money, in the divorce process. Animosity is what usually leads to long drawn-out divorce proceedings, which will place a financial strain on retirement and savings.

Know the Rules

Often, unfortunately, attempts at brokering a peaceful resolution fail. In this instance, knowledge of rules that govern retirement plans, accounts, and pension payments is vital. For example, if any debt is owed outside of a retirement plan, it is usually considered a joint obligation. This can help alleviate some strain, as both spouses may be responsible for the joint obligation, dependent on your state’s laws and the circumstances surrounding that debt.

Seek an Experienced Professional

It is crucial for one to seek an experienced professional to represent him or her in their divorce matters because there are many strategies to protect retirement savings. Only a properly trained and knowledgeable professional will know the various options and which one is best for your unique scenario.

What if You Are Already Divorced, and Your Retirement Savings Are Suffering? Is There Anything You Can Do?

Once a judgment is entered, it is final. There are very few reasons that would allow you to go back and change the judgment. Certain criteria need to be met, but each state’s laws are different. There are options, however, to “boost” your retirement post-divorce. It is recommended that you meet with a qualified financial planner to see how you may be able to recoup the losses sustained to your retirement accounts. It may require a change to your current lifestyle, but a small change could make a big difference in 10, 15, or 20 years. People now are typically working later in life than their parents and grandparents, so do not despair, there is usually time to regain what was lost.

Putting Divorce Behind You

Usually, when a marriage ends, it does not happen overnight. These events can be emotionally and mentally exhausting, and a person is typically not focused on their finances or employment. When this tumultuous period has concluded, one is likely to move forward in a more positive mental and emotional state. This also leads to success in business, finances, and employment. One can usually start becoming more financially sound in a short period of time. Once the divorce is behind them, many are reinvigorated and motivated to live a much more abundant life in all areas, including their financial well-being in retirement. Finally, while the expense of proper legal counsel may seem intimidating or daunting, you should never be too short-sighted when protecting your well-deserved financial future.


Sabrina Shaheen Cronin

Sabrina Shaheen Cronin is a Family Law Attorney and founder and managing partner of The Cronin Law Firm. She’s been running her own full-service law firm for the last decade and is now expanding her work into the realm of family coaching, offering workshops and personal counseling to families undergoing stressful changes. Her work aims to provide families navigating the waters of separation, divorce, and co-parenting with a road map that they likely would not otherwise have access to. Her goal is simple: to offer the same compassionate support to those who need it that she has offered to her own firm’s clients through the years as they try to navigate life’s messiest situations. Sabrina has been featured as an expert for dozens of publications and news channels including Business Insider, Real Simple, Yahoo!, VeryWellMind, MyDomaine,,, Nutritious Life and appears as a regular on FOX 2 Detroit. She is the creator and host of The Cronin Challenge2Change’s podcast‬ and video series and recently appeared as a guest on the BELLA Magazine “BELLA Talks” Podcast.

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