How Does Retirement Affect Your Alimony Payments?
Alimony is typically ordered by a family court or agreed upon as part of a divorce settlement. These payments may be made regularly over time or as a lump sum. For people making or receiving regular alimony payments over the years, the prospect of retirement may raise questions about how it will be handled after they retire.
Does Retirement Automatically End Spousal Support?
Under New Jersey law, retirement does not officially bring an end to a spousal support obligation, regardless of whether the person retiring is doing so early or at the Social Security full retirement age. Any provision of a marital settlement agreement in New Jersey can be modified in light of changed financial circumstances, however. Retirement is one such circumstance allowing for an alimony agreement to be modified. If you are retiring and seeking a change in your obligations, a New Jersey family law attorney can help you to reopen the agreement for modification.
Special clauses in a divorce settlement may contradict this general approach, however. Both parties may agree at the time of the divorce that retirement officially terminates the alimony obligation. In other cases, both parties may include a non-modification provision in the agreement although this is rare as there are a range of issues, from retirement to disability, that can give rise to an agreement modification. During divorce negotiations, your divorce attorney may advise you to include specific clauses as part of the settlement that envisions an end to the obligation upon retirement.
In many cases, people and their divorce lawyers may include clauses that expect that the paying spouse will retire at 66 or 67 and that their alimony obligations will terminate at that time. Other agreements do not automatically terminate alimony at that time but instead, explicitly plan for a modification or potential modification to take place at that time. Early retirement and similar contingencies are less frequently included explicitly even though early retirement buyouts may be a common part of many corporate restructurings.
Termination of Alimony Obligations
There are several occasions on which alimony automatically terminates under state law. The first such circumstance may seem apparent: the death of either party; the second is equally clear: the remarriage of the receiving spouse. Some alimony recipients may require the purchase of a life insurance policy as part of their divorce agreements, in which the former spouse will receive the payment in case of the unexpected death of the obligor.
In addition, many alimony orders in New Jersey are not permanent and do not stretch to the age of retirement. Of course, this depends on the unique circumstances of each couple. Your family lawyer can provide advice about the different types of spousal support. Limited duration alimony is awarded for a specific, fixed period of time. Rehabilitative alimony is also generally provided for a shorter term as the aim of this form is to provide funds for the recipient to seek education, training and other resources to boost their own income to make alimony unnecessary. Open durational alimony, on the other hand, can last for the lifetime of each party unless otherwise terminated.
Changes to New Jersey Spousal Support Law
Alimony orders entered before and after Sept. 10, 2014, are treated differently because of changes to the law during that year. Of course, if you are considering retiring, you may have an alimony obligation in place from before that year. A New Jersey family lawyer can provide advice to help you address the situation regardless of the year in which your divorce was concluded. The amendments to the alimony law in 2014 provide more specific guidance as to how one party may seek to modify or end their spousal support obligations upon retirement, whether that retirement has already happened or is under consideration. It also points to how retirement can be handled when it takes place at the traditional or Social Security age or as part of an early retirement program.
For alimony obligations established before Sept. 10, 2014, full retirement age is considered “good faith retirement age,” that is, a retirement that is being concluded for the purpose of retiring normally and not in order to evade an alimony obligation. The payer has the burden of showing why their obligation to continue to pay alimony should terminate after retirement, based on a series of factors.
On the other hand, for alimony orders concluded on or after Sept. 10, 2014, the presumption is now that the alimony obligation should terminate when the payer reaches full retirement age, and the recipient must show why alimony payments should not end or be reduced due to the changed circumstances. In all cases, people who are choosing early retirement are expected to show with the majority of the evidence — a preponderance — that they are retiring or planning to retire early in good faith and not merely as a means of limiting spousal support payments.
The factors that will be analyzed in a modification include the following:
- Age and health of both parties at the time of an application to terminate or modify alimony
- The field of employment of the paying spouse and the generally accepted retirement age for people in that profession
- Dates related to retirement for the paying ex-spouse, including any mandatory retirement dates, ages of retirement eligibility, and dates when retirement benefits no longer increase due to continued work
- Motivations for retirement, including but not limited to personal motivations, employer incentives or pressure to retire as part of a corporate restructuring or similar plan
- The expectations of both parties at the time of the divorce or dissolution about how spousal support would be handled at the time of retirement
- The ability of the payer to continue to pay, including whether most of the payer’s funds come from employment, investments or other sources, and whether the payer plans to take up a new job at another company after their retirement for either full-time or part-time work or consulting
- The recipient’s level of financial independence and the financial impact of the retirement on the recipient
- All relevant information about both parties’ financial situations and changes
Each case is different. The particular facts and circumstances of a case is what should ultimately dictate the outcome. If you are planning to retire and want to make a change to your alimony agreement, your divorce lawyer may help you to achieve your goals. Similarly, if you are an alimony recipient worried that you will take a significant hit as a result of your former spouse’s early retirement or other life changes, a divorce attorney can help to protect your interests in a modification or termination hearing.
Speak With a New Jersey Family Lawyer About Retirement
If you are considering a modification to a New Jersey spousal support order upon retirement, a family law attorney may provide representation to protect your financial rights. Contact the experienced lawyers at Lawrence Law by calling 908-645-1000 or using our secure online form for a consultation about your unique situation.