Retirement is a significant issue during New Jersey divorces, with implications that are two-fold. First, retirement accounts, pensions, 401k’s, IRA’s, and similar financial resources become subject to equitable distribution in most cases. Second, since the enactment of New Jersey’s Alimony Reform Bill in 2014, retirement has become a proverbial “cut-off” point that may provide grounds for termination of alimony payments. In this article, we will deconstruct retirement as a critical component of your New Jersey divorce, as it relates to division of assets and spousal support, to better understand how these issues may affect your financial future.
First, let’s examine retirement from a division of assets perspective. Retirement accounts, like other financial accounts and valuables, are considered “assets,” which, under New Jersey law, are subject to equitable distribution. Note, that “equitable” does not necessarily mean “equal,” but only refers to the standard of fairness by which assets must be divided. When dividing your retirement account, the name on the account (or person who holds the account) is irrelevant, as these resources are considered “marital property.” This means that each spouse is entitled to a portion of the retirement account. It is important to note, however, that the part of the account that is subject to equitable distribution is only the amount accrued between the date of the marriage and the date of the complaint for divorce.
As it relates to alimony, retirement has become an increasingly significant factor since the passage of New Jersey’s Alimony Reform Bill in 2014. The new law contains multiple provisions related to retirement, the most important of which are as follows:
- An alimony payer has the right to apply for a modification or termination of alimony payments when he or she reaches full retirement age.
- “Full retirement age” is defined as the age at which “a person is eligible to receive full retirement benefits under the Social Security Act.” Currently, full retirement age is 67.
- A person who retires at full retirement age is assumed to have retired in good faith, regardless of his or her ability to continue working. The payee is then required to provide sufficient evidence to support why alimony payments should not be terminated. Previously, the payer was given the burden of proving that alimony should end upon retirement. Now, the burden has been shifted to the payee.
- When considering an alimony modification or termination, the presiding judge will consider whether or not the alimony recipient has or should have attempted to save for his or her own retirement.
- The alimony payer can apply for a modification or termination of alimony payments prior to his or her actual retirement in order to reach a determination before retirement affects his or her income. Although alimony payments must continue until full retirement age is reached, the predetermined arrangement will allow both the payer and the payee to plan for their respective financial futures.
Clearly, effective retirement planning is essential to ensure your financial security as you grow older. The importance of retirement considerations during your New Jersey divorce continues long after the final divorce decree, as it spells significant implications for your spousal support arrangement. Regardless of your situation, the ability to modify or terminate alimony requires an application and further court proceedings. Enlisting a knowledgeable divorce and family law attorney can serve as your greatest step to securing a favorable outcome. To learn more, contact the law offices of Townsend, Tomaio & Newmark in Bergen County, New Jersey at 201-397-1750. One of our knowledgeable lawyers will be happy to provide the answers to your questions with a cost-free consultation.