January is often associated with the new year and fresh starts. That can mean new jobs or resolutions to improve your lifestyle.
But it can involve difficult transitions too. In legal circles, January is often referred to as "Divorce Month," because there's an uptick in the number of couples that file for divorce after the holidays.
If you're among them, you've got an emotional journey ahead as you navigate the divorce proceedings and map out what you want your life to look like going forward. As part of this process, you'll need to rethink your retirement plan as well. Here are four steps to help you do that.
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1. Understand how the divorce will affect your current retirement assets
If you and your ex already have some retirement savings, you'll have to decide how to divide them up as part of the divorce. Generally, retirement savings you had prior to marriage are considered yours. However, retirement savings contributed during the marriage could be marital property.
It depends partially on the state you live in. Community property law states -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin -- generally consider any retirement savings acquired during the marriage as marital property, even if only one spouse contributed to it. Common law states -- those that aren't community property states -- are more likely to view retirement savings as separate assets, though there can be exceptions.
In some instances, one spouse may have to give some of their retirement savings to their ex under a Qualified Domestic Relations Order (QDRO). This isn't the same as an early withdrawal, and there shouldn't be any taxes or penalties on it. But having to pay part of your retirement savings to your spouse through a QDRO could leave you behind in your goals. On the other hand, if you receive money from your ex due to a QDRO, you might be better off than you may have expected to be.
If you have any questions about QDROs or how they could affect you, consult your divorce attorney.
2. Rethink what retirement looks like for you
Rebuilding your plans for retirement involves two pieces. First, you must think about what you want retirement to look like after divorce. You might want to retire somewhere different or spend your time doing different activities than you'd originally planned to.
Take some time to consider the lifestyle you want. You can change your mind later if you need to, but having a plan gives you something to work toward.
This is crucial for the next step, which is estimating how much your retirement will cost you. One of the most common ways to do this is to determine what you expect your annual out-of-pocket expenses to be in retirement. Start with your total annual retirement costs, and then subtract money you expect from Social Security (more on that below), alimony, or other income sources. Next, multiply the result by 25. The total is supposed to be the amount you need to last you 30 years in retirement.
However, you may need to adjust this amount up or down, depending on your life expectancy. Or if you have some big-ticket purchases planned, you might need to include extra savings to cover those.
3. Plan how you'll save for retirement from now on
Once you have an idea of how much you need to save for retirement, you'll have to figure out how to get there. Again, you may already have some retirement savings of your own, or you may be entitled to some of your spouse's. But unless you're already at or near retirement age, you'll probably have to save more on your own.
Once you have an idea of your monthly budget after the divorce, you can estimate how much you'll be able to save per month. You might find that your original retirement timeline is no longer feasible. In that case, you may have to delay retirement or consider a phased retirement where you gradually reduce your hours over time rather than quitting the workforce all at once.
4. Know what to expect from Social Security
You may qualify for your own Social Security benefit if you've worked long enough to earn 40 credits. One credit is $1,810 in earnings in 2025, and you can earn a maximum of four credits per year. You could also be entitled to a spousal benefit on your ex's work record if you were married for at least 10 years before divorcing, and you have not remarried. It doesn't matter if your ex remarries.
Your spousal benefit is worth up to one-half of what your ex qualifies for at their full retirement age (FRA). That's 67 for most workers today, though some older adults have FRAs as young as 66. If you claim early, you may get less than this.
The Social Security Administration automatically gives you the larger of your own benefit or your spousal benefit. However, if your spouse isn't claiming Social Security when you apply, you won't be able to claim a spousal benefit on their work record until you've been divorced for at least two years.
Contact the Social Security Administration if you need help estimating what your retirement and spousal benefit could look like. Once you know which one will likely give you more money, you can figure out how much of your retirement expenses you'll still need to cover on your own.
You will probably need to revisit these steps periodically. Your thoughts on retirement might change once the divorce is no longer so new. Or you might meet a new partner down the road. Whenever your plans change, be sure to review your retirement plan again and make adjustments as needed to stay on track.
