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Porter Ramsay Blog

How to prepare for retirement when going through divorce

On Behalf of | Feb 2, 2021 | Family Law |

Many married couples plan ahead for retirement as a unit, counting on one another’s pension, CPP benefits and/or RRSP savings to get them through their golden years. But what happens with these accounts when a couple ends a marriage, especially later in life when retirement savings are well underway? The answer depends on the specifics of a couple’s situation and the agreement they work out, as well as the standards laid out under British Columbia family law.

Here are some ways to start adjusting retirement plans when a divorce is now part of the picture:

  • Make a list of assets, liabilities and projections for retirement accounts: This is important in all divorces but is absolutely critical to get right in grey divorce where neither party has as much time to “rebuild.” Some assets, like pension plans or insurance policy, may not have a hard and fast “value,” so speaking with a financial planner about these particulars can be helpful.
  • Have a legal discussion about any pension plans: In most cases, pensions are split between married retirees even if they were contributed to by one during their working years. However, this can ultimately depend on the details of the pension plan, the length of the marriage and other possible factors. Seeking expertise when it comes to pensions in particular is a good idea.
  • Consider medical benefits: As an individual ages, the additional medical costs can grow. So, too, can their risk of illness or disability, making early retirement necessary. These potentialities need to be considered in any conversation about splitting assets and spousal support.

In situations where one spouse was the primary earner and the other put work on hold to raise children, the homemaking spouse can feel very vulnerable in a grey divorce. This can be heightened when full details about finances are not known clearly by both parties.

However, the reality is that, in most cases, the non-earning spouse does have protections and a right to a certain amount of assets under the law. It is beneficial to consider all of these issues at the time of the divorce to avoid needing to revisit financial support and pensions at the time of retirement. A lawyer can help clarify the necessary considerations and options regarding retirement assets, providing much-needed peace of mind during the divorce process.