Even if your divorce happens decades before you retire, your retirement savings will likely take a major hit. First, a divorce usually means that the funds in your retirement accounts are divided between yourself and your ex-spouse, so your retirement savings will shrink substantially. And second, divorce means that you'll at least temporarily become a one-income household -- so you'll probably end up saving a lot less for retirement than you had planned, at least in the near term.
Splitting your retirement savings
State and local laws determine how your retirement savings gets divvied up between you and your ex-spouse.
Massachusetts uses "equitable division” to figure out who owns what after a divorce. Under the concept of equitable division, it's up to the judge to decide the fairest way to split the divorcing couple’s assets, including retirement. Judges generally consider factors like how long the marriage lasted, each spouse’s contribution(s) to the marriage, age, health, and so on.
Protecting Your Retirement Savings
Given the way in which courts divide assets in a divorce, the question becomes how can you best protect your retirement savings? The surest way to protect your retirement savings is to set up a prenuptial agreement that specifies who gets what from the retirement accounts should your marriage end. If you don't have a prenup, your best bet is to try to come up with a compromise with your spouse that will work out to your mutual advantage. If you cannot reach an agreement with your spouse, having your lawyer make a compelling argument for the judge can help you to get a favorable decision in court, but it's definitely not a sure thing.
Building a new plan
Once you know how much of your existing retirement savings you'll get to hang on to, it's time to draft a new retirement plan. You'll need to factor in both the reduction of your existing savings and (most likely) the reduction of your future income. On the other hand, now that it's just you, you'll probably be able to set a lower goal for how much income you'll need in retirement.