Alimony and Retirement: What You Need to Know

alimony and retirement

In divorce cases, one aspect that often arises is the determination of alimony or spousal support. Alimony is intended to provide financial assistance to a lower-earning or non-earning spouse during and after divorce.

New Hampshire Alimony Law

We have previously described the New Hampshire alimony law that became effective in 2018. According to this law, alimony “shall be the lesser of the payee’s reasonable need or a formula based on 23 percent of the difference between the parties’ gross incomes.” The length of the alimony shall be no more than half the duration of the marriage, unless a judge finds that “justice requires” an adjustment to that length.

Alimony During Retirement

One question that often arises, especially later-in-life, long-term marriages, is whether alimony must continue during retirement. The general rule is that once the person paying alimony reaches “full retirement age,” then alimony must be terminated. “Full retirement age” is defined as the age at which a person is eligible to receive social security. For most people currently of working age, full social security will be at age 67. However, individuals born prior to 1960 have a gradually lower retirement age. By around the year 2027, all individuals will have reached full retirement age at 67. Unless there are significant social security reforms, the age of 67 will apply to everyone going forward.

However, there are a couple of exceptions to this rule that could require a person to keep paying alimony after they retire. First, a judge can continue alimony during retirement to “equalize” a disparity in social security benefits. If both spouses have a different earnings history, there will usually be a significant discrepancy in social security income. A judge could order the party receiving the greater social security income to pay alimony to the other party in an amount up to half the difference.

How an Ex-Spouse’s Social Security Income is Calculated

According to the social security rules, if a marriage lasts at least ten years, an ex-spouse can claim social security benefits based on their own earnings record, or half of their ex-spouse’s social security amount, whichever is higher. However, the divorce must be in effect for at least two years, meaning they often start at the lower amount and move up to the higher amount after two years. If the ex-spouse chooses the higher amount, it does not reduce the ex-spouse’s social security amount. In many long-term marriages where one spouse earned much more than the other, the lower-earning spouse will use the higher-earning spouse’s earnings record, resulting in exactly double the difference in social security income.

An Example of  Social Security Offset Alimony

To understand this concept, let’s consider an example. Suppose a husband and wife are both age 67 and have been married for 40 years. The husband was the primary breadwinner, while the wife stayed home with the children and only went back to work after they completed school, never earning nearly as much as the husband. Therefore, when it comes time to retire, his social security income will be $3,000, whereas she would only receive $1,000 based on her own record. Instead, she uses the ex-spouse rule and elects to take $1,500. However, for the first two years of the divorce, she will only receive $1,000. All marital assets, including home equity, the husband’s 401(k), vehicles, and personal property, are divided equally.

In a very long-term marriage where all assets were accrued during the marriage, a judge may aim to situate the couple as equally as possible. Therefore, a judge may reasonably order alimony of half the difference in social security for the rest of the husband’s life. Initially, the husband would pay $1,000 in alimony per month because the initial difference in alimony is $2,000. Once her social security increases to $1,500, his alimony would decrease to $750. It’s important to note that the judge has discretion in this matter and can consider several factors when deciding. While the judge is not required to follow this approach, it wouldn’t be unreasonable for them to do so, and it’s unlikely that the decision would be reversed on appeal.

Judge’s Discretion to Continue Alimony Into Retirement

The second possibility is that a judge can continue alimony past retirement age “if justice requires.” In making this decision, the judge considers various criteria, including the health of either party, financial dependence, job skills, voluntary unemployment or underemployment, special needs of a child, division of property, fault in the marriage, differences in social security income, intentional reduction of total property, and tax considerations. Additionally, the judge can consider any other relevant factors. As you can see, the judge’s discretion in this matter is quite wide. However, if a judge is to continue alimony beyond retirement and beyond a social security offset, they should provide a clear justification and reasoning for their decision, backed by specific facts.

Our New Hampshire divorce attorneys at Cohen and Winters are committed to walking clients through the divorce process and ensuring a fair and equitable split. If you need assistance, please contact us today.

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