Divorce and Retirement: A Guide for Affluent Women Over 40

Divorce changes nearly every aspect of your financial life, but for affluent women over forty, one of the biggest concerns is retirement security. After years of careful saving and investing, it can feel overwhelming to watch your nest egg get divided. Add in legal costs, the shift from two incomes to one, and the possibility of supporting children or aging parents, and the path to a secure retirement can feel uncertain.

The good news? With the right planning and guidance, you can protect your financial future and rebuild confidence in your retirement plan.

Why Divorce Puts Retirement at Risk

Retirement accounts are often a couple's most valuable assets, second only to the family home. Whether you've built a substantial 401(k), a pension, or multiple IRAs, these accounts are on the table in divorce.

• Division of retirement assets: In community property states, savings accumulated during the marriage are split evenly. In common law states, assets are divided "equitably," based on factors like earning ability and future needs.
• Tax implications: While transfers can be structured to avoid taxes (via QDROs for employer-sponsored plans or transfers incident to divorce for IRAs), mistakes here can be costly.
• Living expenses: Living on one income means higher relative costs for housing, healthcare, and everyday living—directly affecting your ability to save for the future.

Without careful planning, you could end up overspending now or underfunding your retirement later.

Six Steps to Safeguard Your Retirement

1. Reassess Your Goals

Life after divorce often looks different than you imagined. Do you still want to retire at 62, or does it make sense to work a few more years to replenish assets?

Example: A 48-year-old executive who originally planned to retire at 55 finds that extending her retirement age to 60 helps her rebuild savings while still maintaining her lifestyle.

2. Recalculate What You'll Need

Factor in spousal support, child support, or changes in living expenses. These adjustments ripple forward into what you'll need saved.

Example: A physician in her early 50s sees her personal cost of living jump nearly 40% after divorce. To stay on track for retirement, she may need to increase annual savings substantially.

3. Maximize Contributions

If your income allows, increase contributions to 401(k)s or IRAs. Women over 50 can take advantage of catch-up contributions to help make up ground.

Example: Directing a portion of a divorce settlement into tax-advantaged accounts can significantly strengthen future retirement security.

4. Review Social Security Benefits

If your marriage lasted 10 years or longer, you may be eligible to claim Social Security based on your ex-spouse's record — even if they remarry.

Example: A woman in her late 50s who divorced after 22 years of marriage may be entitled to spousal benefits that are higher than she would have received on her own. She receives the higher of half of his at his Full Retirement Age, or her full benefit.  (Note: His is not reduced by whatever she gets).

5. Adjust Investments

Your risk tolerance may shift after divorce. A concentrated position in one company's stock, for example, can leave you vulnerable.

Example: If most of the retirement assets received in a settlement are tied to one company's stock, diversifying helps reduce risk and protect long-term goals.

6. Plan for Healthcare Costs

Healthcare is one of the largest expenses in retirement. Long-term care insurance or a health savings account (HSA) strategy can help protect your assets.

Special Considerations for Affluent Women Over 40

For affluent women, the complexity of divorce—and the opportunity for smart planning—only increases:

• Tax strategies: With multiple account types (taxable, tax-deferred, tax-free), the way assets are divided can have a major impact on after-tax retirement income.
• Estate planning: Divorce means revisiting wills, trusts, and powers of attorney. For women with adult children, this is often as important as updating beneficiaries.
• Complex assets: Stock options, deferred comp, or business ownership require careful valuation and division.

Example: Imagine someone with rental properties in two states. By structuring the divorce settlement so she keeps more retirement accounts while her ex takes the real estate, she could simplify her financial life and reduce tax complexity while still meeting income goals.

Don't Go It Alone

Divorce is not the time to rely on guesswork or generic advice. Working with a Certified Divorce Financial Analyst® (CDFA®) and CFP® professional can help you:

• Evaluate settlement proposals in light of long-term retirement security
• Model how dividing retirement accounts will impact your future income
• Coordinate with your attorney to ensure divisions are filed correctly and tax-efficiently
• Create a clear, updated retirement plan that gives you confidence moving forward.

Securing Your Future

Divorce may alter your financial trajectory, but it doesn't have to derail your retirement. With careful planning, proactive adjustments, and the right advisors by your side, you can secure both your independence today and your financial freedom tomorrow.

At Divorce Advisory, we specialize in guiding women through the financial complexities of divorce so they can protect the retirement they've built and move forward with clarity and confidence.

Reach out today to schedule a complimentary conversation.