Retirement and its Impacts on Support Obligations in Divorce Proceedings

 Posted on September 04, 2024 in Divorce

Those who work outside of the home often have a goal of retiring by a certain age. The decision to retire is generally made based upon one’s age and health and considering retirement benefits available to them, including 401ks, IRAs, Social Security benefits, pension and annuity benefits available. However, when a party has a spousal support obligation (i.e. maintenance or alimony) or a child support obligation, the impact on that must also be a consideration. The duty to support one’s children and a former spouse is not one that is taken lightly and a voluntary retirement could potentially be interpreted as an effort to avoid a support obligation. Therefore, it’s important to consult with an attorney before you retire to determine the implications it could have on your obligation to pay support.

To begin with, the Social Security Administration provides a retirement age at which you are eligible to receive full benefits (between 66 and 67 depending on the year in which you were born). However, one may also be eligible to receive benefits as early as age 62, with a reduction in the benefit amount. A former spouse and/or a minor child may also be eligible for benefits through the Social Security Administration (SSA), which is a consideration as it relates to the impact on a support obligation. Because the divorce court cannot touch a person’s Social Security benefits, you should refer directly to the SSA to determine eligibility issues: https://www.ssa.gov/pubs/EN-05-10035.pdf.

Under Illinois domestic relations law, unless your divorce judgment specifies otherwise, retirement is not a basis to terminate a maintenance or child support obligation. However, it can be a basis to modify maintenance if it’s deemed by the court to be a substantial change in circumstances. A substantial change in circumstances is typically non-voluntary, such as termination of one’s employment or an inability to work due to severe health conditions. Accordingly, retirement falls into a grey area (is it voluntary or not?) and requires the court to examine what constitutes a voluntary reduction in income.

In making its determination, the court will look at a host of factors, including the ages of the parties, health status, job duties, the reason for retirement, job opportunities available to the payor, as well as assets and income available to both parties, including eligibility to receive benefits under Social Security or other retirement plans. Further, the court may consider whether or not the retirement was contemplated at the time the support order was made.

The court will assess the situation on a case-by-case basis and decide whether or not the payor voluntarily reduced their income in an effort to avoid a support obligation or whether the retirement was in good faith. If retirement was made in good faith, support may be modified substantially, even to the point of $0 per month. While this may seem the equivalent of a termination, it is not because the recipient could later petition to increase the amount, whereas when maintenance is terminated there is generally a permanent bar from coming back to court to request maintenance in the future. If retirement is determined to be in bad faith, then the court can deny the request to modify the support obligation, effectively imputing income to the payor in the amount that they were earning when they were employed.

There have been many cases which have addressed this issue and, as stated above, there is no definitive answer as every case is unique in its own way. But as a general rule, Social Security retirement age is a good marker to assess whether one’s retirement is early or appropriately timed. And those who are in good health with non-demanding (physical, emotional or travel) positions are likely to be expected to work for longer period. Further, a recipient who is not self-supporting and severely needs the support is in a better position to argue that early retirement is not appropriate under the circumstances.

Those paying support can protect against the predicaments discussed in this article by negotiating the appropriate provisions into their settlement agreements. For example, many spouses agree to include language within their agreement that a certain age (e.g. 68) is presumed to be a good faith retirement age and that maintenance may in fact terminate upon said retirement. Unfortunately, the same is not true for child support, because of public policy, though most individuals do not have minor children at the age of retirement. If including this language into your settlement is something your spouse is willing to consider at the time of divorce, it’s highly recommended to avoid litigation in the future.

If you have plans to retire while having a support obligation, or you are the recipient of support from a payor who intends to retire, you should ensure you consult with an experienced attorney who can advise you of your rights. Please contact one of our attorneys at 630-407-1200 or visit our website at https://www.dupagedivorcelawyers.com/ for a free initial consultation.