This story is part of Money magazine's special Dream big, act now: Six secrets of retirement, which lays out the key drivers of retirement happiness -- including your investments, health, career, family, midlife changes and debt -- and what you can do about them.
PART 5: MIDLIFE CHANGES
The secret: Forget the house, go for the pension.
Retirement plans often go by the wayside when your marital status changes.
"As a married couple, you have this vision of riding off into the sunset together when you retire. When the marriage ends, you have to create a new vision of your retirement," says Raleigh, N.C., financial planner Steve Gaito.
Divorce or having a spouse die young saps income and assets, making it much harder to continue saving the same way you did as a married couple.
A recent survey by ING found that the average divorced person had $10,000 less in retirement savings than the average married person, even though the divorced respondents were typically five years older.
Women often find themselves especially pressed: Household income drops 41% for women after a divorce and 37% in widowhood, compared with under 25% in both cases for men, according to a report by the Government Accountability Office.
Although family changes put a lot of immediate worries on your plate, it's crucial to keep one eye on your long-term plan.
Don't make 401(k) and pension plans an afterthought as you split up assets. While your first impulse might be to go for the family house, weigh the benefits of doing so if it means getting less of the retirement accounts you and your spouse built up together.
"The spouse who gets the retirement plan assets may be in much better shape for retirement than the one who got the house," says RegentAtlantic investment adviser Chris Cordaro. Houses are illiquid and have carrying costs that may be difficult to maintain on a single person's income.
Sometimes the best strategy for both parties is to sell the house, split the equity, and downsize.
Next, take control of your portfolio choices. If you get a portion of your spouse's workplace retirement accounts, the court will sign off on a qualified domestic relations order.
With a traditional pension, this allows your spouse's plan to create a separate account in your name. If it's a 401(k), the money could either go into an IRA or be kept in your name with your spouse's plan administrator, with a choice to roll over later. Converting to the IRA is usually best, as this will give you a wider choice of investment options and more control over the fees you pay.
Keep the investing part simple. Since in many couples just one spouse handles the chore of managing investments, you might feel like you suddenly have to climb a steep learning curve to run your retirement funds.
An easy start: Put the money in a target-date fund, which gives you a premixed, diversified portfolio appropriate for your age, at least until you've had a chance to consider other investments. The target funds from T. Rowe Price and Vanguard are on the Money 70 list.
If you remarry, you can keep the money separate, but don't let it be a secret. Prenuptial agreements are more common in second marriages, particularly if spouses want to preserve their assets for their own children. That doesn't mean you shouldn't be working together toward your goals.
"Individuals can keep things legally separate, but mentally they need to manage everything as if it's one," says financial planner Jacob Gold of Scottsdale.
When facing a spouse's early death, give yourself a financial cooling-off period. You may suddenly have a lot of money -- from life insurance or retirement accounts -- to deal with at all once.
And that means you'll soon hear from people, whether it's a well-meaning family member or an agent or broker, with ideas for how to invest it.
Park the money somewhere safe for the short-term. If you let six months or a year pass while you deal with the emotional impact of the loss, you can make financial decisions with a clearer head.
More secrets to a dream retirement: