If you are diligent enough to have saved for retirement, then dividing retirement assets can be one of the trickiest parts of divorce planning. There are countless types of retirement plans, federal and state laws that apply to different kinds of plans and tax consequences that must be considered in dividing retirement accounts.
But, perhaps more important is the overall question of whether each spouse will be adequately provisioned in retirement.
It is not uncommon for one spouse to have substantially more retirement savings than the other. This is especially the case where one spouse has worked throughout the marriage while the other has not.
In some cases the spouse with the greater retirement savings resists dividing the funds. The most common reasoning for this is “I spent x years working my tail off to get that retirement. I shouldn’t have to give any of it away.” I think we can all understand why someone might feel that way. After all, sometimes retirement savings feel like the only tangible reward that you’ve got to show for decades on the hamster wheel.
Nonetheless, there is at least one important fact to consider if you have kids and your spouse is low on retirement savings: If your spouse cannot afford to support themselves in retirement, then it may well fall to your children to support them.
Children are not legally required to financially provide for parents. But, many adult children feel some obligation to financially support parents who cannot provide for themselves. At the very least it can be a significant stressor to know that a parent is not financially secure, or cannot afford the care that they need.
You may not feel a need to ensure that your ex-spouse is financially secure in retirement. You may or may not be legally required to do it. But, when considering your options and what’s important to you, you may want to take a longer view of the situation. If you and your spouse are not able to secure retirement incomes down the road, then you may simply be passing the buck to your children.
Obviously, the facts of any given case will dictate whether this is an issue. But, the point is that a decision to not provide for your or an ex-spouse’s retirement in some way can negatively impact your children. And, that is a ripple effect of divorce that few people want to create.