What happens to your pension during a gray divorce?

According to AARP, divorce rates are dropping among people under age 50 and rising for couples over 50, with one out of every four older couples filing for divorce. However, divorce can slow cash flow and impact retirement savings, including pensions, individuals set aside for financial security.

However, it may be possible to protect your pension during your gray divorce.

Can your spouse receive part of your pension?

Iowa is an equitable distribution state in which the court determines property division when divorcing spouses can not reach an agreement. Pension funds you earn during your marriage are community property; therefore, they are subject to equitable distribution. However, it may be possible to retain most of your pension to use during your retirement.

How can you retain your pension?

Your spouse may file a Qualified Relations Domestic Order to receive a portion of your pension fund that is part of the community property you share. However, an Iowa judge may consider these factors when determining the pension’s distribution:

  • The age of you and your spouse
  • Your age you and your spouse retire
  • Your pension type
  • Other assets your spouse receives

Still, you can take steps to retain much of your pension.

Offer survivor benefits

Most pensions provide survivor benefits when pension holders die. You can ensure access to your pension fund when you need it by asking your spouse to choose survivor benefits instead of an immediate distribution.

Offer an alternative

Consider offering your spouse another asset like a car or house in exchange for a share of your pension. Be sure to work out this arrangement before a judge finalizes the divorce.

Divorce can be unsettling at any age, but you can prepare for its financial consequence and ensure you achieve your future goals.