How to Handle Spousal Support When the Payor Retires

Retirement is a significant life event that can lead to complex financial questions, especially for those who are paying or receiving spousal support. Whether you are negotiating spousal support in an initial divorce settlement or considering modifications due to retirement, understanding the factors that influence these decisions can help you make the best choices for your financial future. 

In this post, we discuss the topics that might be on your mind, what you can do about spousal support changes in retirement, and how a CDFA can help.

Consider Retirement in the Initial Agreement

When spousal support is on the table in your divorce, or if you have been receiving it for some time, consider what will happen when the payor eventually retires. If the payor is already in their 50s at the time of divorce and planning to retire early, addressing this possibility in your decree can prevent complications later. Some couples create a maintenance plan that takes into consideration future expected pension payments and social security income.  One possible solution could be to gradually decrease maintenance within a certain timeframe to accommodate a known retirement date. This type of planning can provide both parties with financial stability, remove uncertainty in the years ahead and avoid possible court and attorney involvement in the future.

Understand the Modifiability of Maintenance

The ability to modify spousal support depends on how it was initially structured. In Colorado, if the agreement is a contractual agreement and specifies a specific amount and term, it generally cannot be altered, even if the payor retires. However, if maintenance is based on state statutes, which is more common, it may be subject to modification when a significant change in circumstances occurs, such as retirement. Courts and your legal counsel will attempt to determine whether the retirement is reasonable, and if the payer is attempting to retire early solely to avoid paying support, the modification could be denied.

Analyze Financial Impact Post-Retirement

In post-divorce modifications, financial analysis can be a significant tool in helping support your case to determine whether spousal support should continue, decrease, or end. A thorough evaluation of the income, expenses, and assets of both parties can be an important step in making a case for spousal support changes. For example, in a recent case that was conducted for a post-decree matter, a financial analysis was performed and detailed multiple scenarios, including how the recipient’s assets and Social Security benefits would support them over time. The analysis also factored in whether certain assets should be included, such as property that was designated for their adult children’s use or funds set aside for the payor’s current spouse. After adjusting for these factors, the court determined that the recipient  needed to continue the financial support, and the maintenance order did not change even though the payor retired at the age of 67 years old

Looking Ahead

Spousal support and retirement are connected, and planning ahead can make the process smoother for both parties. Addressing potential retirement in the initial divorce agreement is preferred in many cases of later-life divorce if a reasonable agreement can be made that can reduce the likelihood of disputes later. A well-documented financial analysis can provide clarity and support for fair outcomes when modifications are requested. While every case is unique, being informed about the financial and legal considerations can help both payors and recipients navigate these potential changes with greater clarity and confidence. That’s where I come in. As a CDFA, I provide a comprehensive financial analysis tailored to your situation, helping you understand the long-term impact of different scenarios. Whether you're negotiating spousal support during a divorce or seeking a fair modification post-retirement, my expertise can help give you the clarity and data needed to make informed decisions. Schedule your free consultation today.