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While pension plans are less common today than they once were, many workers still receive a pension — a type of retirement plan that provides guaranteed income throughout retirement (or a lump sum at retirement).

Pension plans are known as defined-benefit plans because the benefits the worker will receive during retirement are predictable (i.e., defined). A 401(k) plan, on the other hand, is called a defined-contribution plan — because workers typically contribute a defined amount each month.

Pensions are employer-provided benefits; an individual can’t set up a pension as they would an IRA account. Read on to learn more about what a pension is and how it works.

How to Get a Pension Plan

Unlike other types of retirement plans, such as individual retirement accounts (IRAs), an investor who wants to save for retirement can’t simply fund a pension on their own. Like 401(k) plans, pension plans must be offered by an employer.

While pension plans were once a mainstay of how companies took care of their workers, they’ve become increasingly less common in recent decades. Only a small percentage of private sector and government employers — about 18% — offered some form of pension to their employees as of 2025.

The main reason many companies no longer offer pensions is that it’s generally cheaper for them to offer defined-contribution plans, such as 401(k) or 403(b) plans. That said, if an individual works for the federal, state, or local government, they may be offered a pension.

Among state and local government workers who participate in a retirement savings plan, a majority are in a pension plan.

Recommended: A 4-Step Guide to Planning Retirement

Pension Plans vs. Other Retirement Accounts

The key difference between pension plans and other retirement plans comes down to the difference between a “defined benefit” plan and a “defined contribution” plan.

•   With a defined benefit plan, such as a pension, the amount workers will receive in retirement is typically predictable: for example, $2,000 per month, which is valuable when you’re living in retirement.

•   With a defined contribution plan, such as a 401(k) or similar, employees’ contributions, or savings, are defined: for example, $500 per month. However, a defined contribution plan doesn’t guarantee a fixed benefit amount once the employee retires.

401(k) vs. Pension Plan

Although 401(k) plans and pension plans are both types of tax-deferred accounts that aim to provide workers with income in retirement, they differ in a few ways.

•   Funding and contribution limits

While the employer generally provides the bulk of funding for a pension plan, 401(k) plans are primarily funded by the employee. In some cases, an employer has the option to contribute to the 401(k) through matching funds. (Employers are not, however, required to provide an employer match.)

Another key difference is the annual contribution limit for each type of account.

For tax year 2026, employee contributions to a 401(k) plan are capped at $24,500 per year, with a total limit of $72,000, including employer contributions. (Those 50 and older may contribute additional catch-up contributions.)

The maximum total annual contribution to a pension plan for 2026 is $290,000.

•   Roth designation

There are other points of distinction between pension plans and 401(k) plans. For example, a 401(k) plan may offer a Roth feature (i.e., a Roth 401(k) account), which allows workers to contribute after-tax funds, and take qualified tax-free withdrawals in retirement. Pensions generally do not offer a Roth option.

•   Income and Taxes

As noted, the income from a pension plan is guaranteed, and thus a defined benefit.

But the income from a 401(k), 403(b), or other defined contribution plan depends on the amount the employee has saved over time, and the investments they selected for their portfolio, and how those investments performed.

The income from both a pension and a regular 401(k) is considered taxable income, however.

Pension Plan vs. IRAs

Individuals can also contribute to tax-advantaged IRAs and Roth IRAs. These are also quite different from pension plans.

Traditional and Roth IRAs are individual retirement savings accounts that individuals can set up. (Small businesses may offer a SEP IRA or SIMPLE IRA to employees.)

•   Funding and contribution limits

The annual contribution limits for traditional and Roth IRAs for tax year 2026 is $7,500 per individual, with an extra $1,100 catch-up contribution for those 50 and older.

Since traditional IRAs and Roth IRA plans are self-funded, there is no employer match. Small-business IRAs, like SEP and SIMPLE accounts, may offer an employer match.

•   Roth accounts

The Roth designation refers to the use of after-tax money to fund a retirement account, such as with a Roth IRA. Roth IRA account holders contribute after-tax funds, and qualified withdrawals are tax-free in retirement.

However, pension plans are tax-deferred accounts; the employee pays tax on their pension income in retirement. Typically, defined-benefit plans don’t offer a Roth option.

•   Income

IRA investors can choose the investments in their portfolio. As a result, the ultimate payout from these plans typically depends on the amount saved and the performance, or returns of the investments in the plan.

Traditional IRAs are tax-deferred accounts, so qualified withdrawals are subject to ordinary income tax. And traditional IRA holders must take RMDs, starting at age 73. Roth IRAs are not subject to RMD rules.

One advantage that pensions have over defined contribution plans is that pensions are guaranteed by the federal government through the Pension Benefit Guaranty Corporation (PBGC). It effectively guarantees the benefits of pension-plan participants. But the PBGC does not cover people with defined contribution plans or IRAs.

Managing Your Pension Plan

Workers with pension plans should talk to a representative in their human resources department and find out what the plan offers. Every pension plan is unique. An employee may benefit from looking into the specifics such as:

•   The pension benefit amount

•   Whether it includes health and medical benefits

•   What kind of benefits the pension will offer a surviving spouse or family members.

Someone just starting in their career may also want to ask when their pension benefits vest. In some plans, the benefits may vest immediately, while many others vest in stages, over the course of as seven or more years, which could affect their plans to move on to a new job or company.

One way to help get a better handle on what a pension may pay over time is to inquire about the pension benefit formula. Utilizing that formula is typically how an employer tallies up its eventual contribution to a pension plan based on years of service and what’s known as final average salary, which is the employee compensation rate the pension is based on.

Most often, the formula will use a percentage of the worker’s final average salary, and multiply it by their years of service to determine how much the employee will receive.

Pros of a Pension Plan

Perhaps the biggest advantage of a defined-benefit plan is the guarantee of predictable income in retirement. That’s the core promise that the PBGC protects.

Many pension plans may also include related medical and other benefits for the employee, as well as related benefits for surviving spouses. However those benefits vary widely from plan to plan and are important to investigate.

With a defined-benefit plan, an employee may be able to generally predict the amount they’ll have to live on after they retire, which could help them decide when they can retire. This might help workers plan for other needs, such as supplemental medical insurance or long-term care insurance, in order to better protect themselves down the road.

Cons of a Pension Plan

One downside of a pension plan is that it may give some would-be retirees a false sense of security.

A pension, with its steady income, might lead some people to avoid budgeting for basic living expenses in retirement, or to believe that their expenses will be the same each month, which is not always the case.

As a result, some retirees may not plan for increased overall living expenses due to the effects of inflation in retirement or sudden, unexpected expenses that may crop up.

There’s also the likelihood that their expenses later in life could be significantly higher, especially medical expenses as they get older.

That’s why it can be important to save for retirement in other ways, such as with an IRA, through an online brokerage account, or some other type of retirement savings plan. Just because a worker has a pension, that doesn’t necessarily mean that it’s the only retirement plan that’s right for them.

The Takeaway

Pension plans are a type of retirement savings plan that are offered by some employers that generally guarantee a certain amount of income to workers after they retire. Pension plans are defined-benefit plans, and differ in some key ways from IRAs or 401(k)s. Pensions have become less common in recent decades, and they have pros and cons, like any other financial product. Individuals may want to have other retirement savings plans along with a pension to help build their nest egg.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

Easily manage your retirement savings with a SoFi IRA.

FAQ

What is a pension plan?

A pension plan is a type of defined-benefit retirement plan offered by employers. Pensions are known for providing a guaranteed amount of income to retired workers. But pensions today are much less common, especially for private sector workers, and they have largely been replaced by defined contribution plans like 401(k)s.

How do pension plans work?

Generally, an employer contributes to the pension fund that will pay workers’ income benefits when they retire (in some cases, workers may also contribute to their pensions) and the money is invested. At retirement, the employee receives a guaranteed amount of income, often monthly. Pension income is taxed at ordinary income rates.

What are the different types of pension plans?

Pension plans vary, so it’s important for employees to know what the rules and restrictions of their plan are. For example, a defined-benefit plan uses a basic formula to calculate the amount the employee will receive. A cash-balance plan bases a worker’s payout on the account balance, while still providing a guaranteed income. In addition, some pensions may include insurance or spousal benefits (or not).

How do pension plans compare to 401(k)s and IRAs?

While there are several differences between these accounts, the most important distinction is that pension plans are defined-benefit plans that provide guaranteed income throughout retirement (or a lump sum) for the employee. Defined-contribution plans, like 401(k)s, do not provide guaranteed income, nor do IRAs, which are individual retirement accounts; instead, the account holder takes withdrawals in retirement.

Another important distinction is that an individual can set up a defined contribution plan or IRA and select the investments in their portfolio. But a person cannot join a pension unless they work for a company that offers one.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOIN-Q326-118

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Age 62 can be an appealing time to step away from the workforce. You’re old enough to start claiming Social Security benefits, yet still young enough to enjoy pursuing hobbies, traveling, and spending time with family. But deciding to retire at 62 is a complicated choice that requires looking carefully at your financial situation, health care needs, and lifestyle goals.

Below are some guidelines to help you decide whether you can (or should) retire at 62, plus a look at the pros and cons of retiring on the early side.

Factors to Consider Before Retiring at 62

If you’re thinking about retiring at 62, you’ll want to explore how it will impact your Social Security benefits, health care costs, living expenses, and lifestyle. Here’s a look at each factor.

Social Security

At 62, you’re eligible to start claiming Social Security benefits, but doing so comes with a caveat. Opting for early benefits reduces your monthly payments compared to waiting until your full retirement age, which is between 66 and 67, depending on your birth year. Claiming benefits at age 62 can permanently reduce your monthly payments by up to 30%, which can significantly impact your long-term financial security.

You can check your Social Security account to see how much you’ll get when you apply at different times between age 62 and 70. If you don’t already have an account, you can create one at login.gov.

Health Care

Health care is a major consideration for anyone looking to retire at 62. Medicare eligibility starts at 65, leaving a potential three-year gap in coverage. That means you’ll need to secure health insurance, which can be costly. Options include purchasing private insurance, relying on a spouse’s employer-sponsored plan, or exploring coverage through the Affordable Care Act marketplace. Evaluating your health care needs and the associated costs is crucial before deciding to retire early.

Expenses

To determine if you can retire at 62, you’ll need to understand your post-retirement expenses, so that you can identify how much you may need in retirement savings. While some costs may decrease, such as commuting or work-related expenses, others may increase, like travel, hobbies, and medical care.

Creating a detailed budget can help you estimate your monthly expenses and determine if your savings and income streams will be sufficient to cover them. When projecting your annual expenses, keep in mind that many expenses will likely go up over time due to inflation.

Recommended: How Much Do You Need to Retire? 3 Rules of Thumb to Consider

Lifestyle Change

Retiring at 62 isn’t just a financial decision; it’s a lifestyle shift. Leaving the workforce means more time for hobbies, travel, and family, but it can also mean a loss of routine, purpose, and regular social interaction. Many retirees struggle with the psychological transition and find themselves missing the structure and camaraderie of the workplace. It’s wise to think about how you’ll fill your days and stay engaged without your old routine. You’ll also want to make sure that your financial resources will support your desired post-retirement lifestyle.

Are You Financially Ready to Retire at 62?

To figure out if you can retire at 62, you can assess your assets and how far they will take you. Here’s how.

Savings and Investments

The earlier you retire, the longer your nest egg needs to last. Do you have enough money set aside in savings and investments to support your desired lifestyle for 30-plus years? One common guideline is to have eight to 10 times your annual income saved by the time you retire.

For example, if you earn $60,000 annually, you should have $480,000 to $600,000 saved. If you’re looking to retire at 62, it may be wise to shoot for the higher end of that range or even beyond it. This may help make up for fewer earning years and (likely) more years to spend your savings.

If your savings aren’t quite where you’d like them to be, there are ways to catch up, such as working a bit longer or adjusting your investment strategy. Perhaps you could contribute more to your 401(k) or open an IRA, for instance.

Retirement Withdrawals

Understanding how much you can withdraw from your retirement savings each year is crucial to avoid outliving your money. One guideline to consider is the 4% withdrawal rule. This rule suggests withdrawing 4% of your retirement investments (such as a 401k or a Roth IRA) annually, adjusting that percentage each year for inflation, to fund a 30-year retirement.

As an example, let’s say you want to retire at 62 with $500,000 saved. If you follow the 4% rule, you’d only be able to withdraw $20,000 your first year in retirement, or just under $1,700 per month. That could constrain your lifestyle, though it doesn’t include what you may get from Social Security.

When calculating your annual retirement withdrawals, keep in mind that the 4% rule isn’t foolproof, especially during market downturns. You may need to adjust withdrawals based on your expenses and the performance of your investments.

Pros and Cons of Retiring at 62

To decide if you should retire at 62, it’s a good idea to weigh both the advantages and disadvantages of early retirement. Here’s how they might stack up.

Benefits of Retiring at 62

•   More time for personal goals: Retiring early gives you extra time to pursue passions, hobbies, or travel while you’re still relatively young.

•   Less work-related stress: Exiting the workforce can alleviate stress and allow you to focus on your well-being.

•   Family time: Retiring early lets you spend more quality time with loved ones, which might include helping with grandchildren or caregiving for aging parents.

•   Opportunities for a second act: Early retirement can free up time to start a small business, volunteer, or explore a new career on your terms.

Drawbacks of Retiring at 62

•   Reduced Social Security benefits: Claiming Social Security at 62 permanently reduces your monthly benefits.

•   Health care costs: Without Medicare coverage, health insurance expenses can take a significant bite out of your savings.

•   Longevity risk: Retiring early increases the risk of outliving your savings, particularly if you live well into your 80s or 90s.

•   Missed earnings: Leaving the workforce early means missing out on additional income, savings, and potential employer contributions to retirement accounts.

Tips to Live Comfortably If You Decide to Retire at 62

If you’re looking to retire at 62, keep these retirement planning strategies in mind.

•   Create a budget: Before you leave the workforce, it’s a good idea to track your expenses and come up with a realistic budget for your retirement years. Keep in mind that some expenses (like commuting to work) will go down, while others (like health care and discretionary spending) will likely go up once you retire.

•   Consider downsizing: To make your retirement savings go further, you might look into moving to a smaller home or a more affordable area to reduce housing costs.

•   Explore part-time work: Even if you choose to retire from your full-time job, you don’t have to fully exit the workforce. You might explore part-time work or consulting to supplement income while maintaining flexibility.

•   Delay Social Security (if possible): Consider using savings to bridge the gap and delay claiming Social Security benefits for a higher payout. The amount you can receive will be higher the longer you wait to apply, up until age 70.

•   Stay healthy: Prioritizing preventive health care and maintaining an active lifestyle may help minimize medical expenses.

•   Maximize investments: It’s generally a good idea to keep your investments, such as those in an online brokerage or other investment accounts, diversified and regularly review your portfolio with a financial advisor.

The Takeaway

Retiring at 62, which is the earliest age you can receive Social Security benefits, may be a viable option. But it’s important to look before you leap. To determine if you can realistically retire at 62, assess your current assets, estimate future income, consider your preferred lifestyle, and determine how you’ll pay for health care until Medicare starts at age 65. You’ll also want to weigh the benefits of retiring early (such as reduced stress and more personal time) against the potential drawbacks (like reduced income and less social interaction).

If your dream is to retire early, you’ll want to implement financial strategies that can help you achieve your goal. With the right preparation, retiring at 62 could be a rewarding new chapter of life.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

Easily manage your retirement savings with a SoFi IRA.

FAQ

How much money do you need to retire at 62?

The amount you need to retire at 62 depends on your lifestyle, health care costs, and expected longevity. One common guideline is to have eight to 10 times your annual income saved before retiring. For example, if you earn $70,000 annually, you would need at least $560,000 to $700,000. To retire at 62, you likely want to aim for the higher end of that spectrum to make up for fewer working years and, presumably, more years to spend your savings.

How much Social Security will you get if you retire early at 62?

If you retire at 62, you can claim Social Security benefits, but your payments will be reduced by as much as 30%. The exact reduction will depend on your full retirement age, which is somewhere between age 66 and 67, depending on your birth year. You can see how much you’ll get when you apply at different times between age 62 and 70 by logging into your Social Security account.

Is retiring at 62 a good idea?

Retiring at 62 may be a good idea if you’re financially prepared and eager to enjoy more leisure time. It allows for early access to Social Security benefits and freedom from work-related stress. However, early retirement also comes with challenges, which include reduced Social Security benefits, a health insurance gap before Medicare eligibility at 65, and a longer retirement period to fund.

To determine if you should retire at 62, consider your savings, expenses, and desired lifestyle. If you have sufficient resources to fund early retirement, retiring at 62 could be rewarding. Otherwise, waiting may offer greater financial stability.

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Photo credit: iStock/kate_sept2004

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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Divorce can be emotionally and financially challenging, and one of the biggest concerns people have is how to finance the process. From filing and attorney fees to establishing separate households, the costs can quickly add up.

Knowing how to pay for divorce is particularly tricky because most people don’t plan for a divorce and, as result, likely don’t have a special bank account in which they’ve been saving up for a divorce. This can leave them feeling stuck in a tight corner.

For anyone scratching their head and wondering how to pay for a divorce, here are some answers. Take a look at how you can cover the cost of a divorce while still keeping an eye on your long-term (post-divorce) financial health.

How Much Does Divorce Cost?

We’ll start with the crummy news: Getting a divorce, already a difficult experience, is also expensive. While the cost varies depending on where you live and the complexity of the divorce, the average cost of a divorce in the U.S is $12,900. That said, a simple DIY divorce could run a lot less (typically a few hundred dollars). A complicated divorce (with disagreements around child custody or dividing up property), on the other hand, could run well over $100,000. Gulp.

Factors that can affect the cost of a divorce include:

•   The state where the divorce takes place

•   Whether the couple lives in an urban or a rural area

•   Whether it is contested or uncontested

•   Whether or not the couple hires professional legal help

•   The complexity of the couple’s finances

•   Whether or not there are child custody issues involved

How Do I Pay for My Divorce?

Ideally, every person, couple, and family would have some emergency money set aside to cover unforeseen events. While many wouldn’t consider this money would be for a divorce,it could qualify as an unexpected expense.

If you don’t have much, or any, rainy day savings, here are some steps that can help you manage the cost of your divorce.

•   Create a budget. A good place to start is to assess your financial situation and create a realistic budget for your divorce. Take a look at your income, expenses, and any debts you may have. This will help you determine how much you can allocate toward your divorce costs, find areas where you may be able to cut costs, and develop a strategy to finance your divorce.

•   Negotiate with your spouse. If possible, see if you can reach an amicable agreement with your spouse regarding the division of assets and expense payments. This can help reduce your legal fees and minimize the overall cost of the divorce process.

•   Explore mediation. Mediation is a cost-effective alternative to traditional divorce litigation. A neutral mediator helps facilitate discussions between you and your spouse, allowing you to work together to reach mutually agreeable solutions. Mediation can often be less expensive and less time-consuming than going to court.

Borrow From Friends and Family

If you need some financial assistance to cover the costs of your divorce, reaching out to friends and family is one option to consider. Loved ones who understand your situation may be willing to lend you money to help you through this challenging time.

You’ll want to approach borrowing from friends and family with caution, however. You want to be sure that you can eventually pay the money back and clearly communicate that you intend to do so. Also, discuss any expectations or terms, and ensure that the arrangement is legally documented to avoid misunderstandings or strain on personal relationships.

Recommended: Am I Responsible for My Spouse’s Debt?

Is a Personal Loan a Good Option to Pay for Divorce?

Another option to finance your divorce is to consider a personal loan.

Personal loans are often unsecured (meaning you don’t have to put up an asset as collateral) and can be used for a variety of purposes, including legal costs. They can provide you with the necessary funds to cover divorce-related expenses while allowing you to make manageable monthly payments over a fixed period, typically two to five years.

If you have good to excellent credit, a personal loan can be a better choice than using a credit card for your divorce costs, since rates are typically lower. A personal loan may also allow you to borrow a larger amount than your current credit card limit allows. Personal loans also come with fixed monthly payments, which can be easier to budget for.

Before applying for a personal loan for your divorce however, you’ll want to consider the annual percentage rates (APRs) and repayment terms offered by different lenders. Be sure to carefully assess your ability to repay the loan to avoid adding further financial stress during and after the divorce process.

Putting Your Financial Health First

While it’s crucial to address the immediate financial challenges of a divorce, it’s equally important to prioritize your long-term financial health. Here are some tips to help you navigate this process.

•   Protect your credit. Divorce can have a significant impact on your credit score. To minimize the impact, you’ll want to be sure to close joint accounts and establish individual accounts. It’s also advisable to monitor your credit report regularly to ensure it’s accurate and address any issues promptly.

•   Update legal and financial documents. It’s a wise idea to review and update your will, insurance policies, retirement accounts, and other legal and financial documents to reflect your new circumstances. You’ll also want to update beneficiaries and ensure your assets are distributed according to your wishes.

•   Focus on rebuilding. After the divorce, take steps to rebuild your financial stability. Set financial goals, create a savings plan, and consider ways to increase your income or reduce expenses. Building a solid financial foundation will help you regain control of your life and prepare for the future.

Recommended: Budgeting Tips for Life After Divorce

The Takeaway

Financing a divorce can be a challenging task, but with careful planning and consideration, it is possible to navigate this process successfully. Key steps include assessing your financial situation, exploring various options such as negotiation and mediation, and, if needed, borrowing from friends and family or getting a personal loan to help cover the costs of the divorce.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

✓ Checking your rate will not affect your credit score.

FAQ

How are finances split in a divorce?

Before a divorce can be finalized, couples will need to draft a legal document that outlines how they’ll split their assets. Once a judge determines the agreement to be fair and legal, it becomes part of the divorce settlement.

Do I have to pay my spouse’s credit card debt in divorce?

In general, you’re responsible for any credit card debt that’s in your name or for joint credit card debt. But if you live in a community property state, you may also be on the hook for a portion of your spouse’s credit card debt, as long as the debt was incurred during your marriage.

How can I prepare my finances for divorce?

There are steps you can take to prepare your finances before the paperwork is filed. One helpful strategy is to keep track of your income and household expenses, such as food, child care, home repairs, and housing. It’s also a good idea to estimate future expenses, such as your child’s school tuition. This information will come in handy as you create a post-divorce budget, but it can also help the judge determine how to split your combined assets and debts.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

This article is not intended to be legal advice. Please consult an attorney for advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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An uncontested DIY divorce could cost $1,500-$5,000, but the price can be lower or much higher. In 2026, the median cost of divorce is $7,500, while the average cost is $12,900. However, all kinds of factors, from attorney fees to assets, influence the bottom line. For example, a contested divorce, with issues around alimony, child support, and child custody, can run much higher.

Here are details about types of divorce and what to expect cost-wise with each.

How Much Does It Cost To Get a Divorce?

The cost of a divorce can depend on which state you live in, how amicable the parting is, and whether you work with a divorce attorney, own property together, and have children, among others.

Most cases settle before going to trial. Here are common costs if you need to prepare for a divorce.

Recommended: How to Prepare Financially for a Divorce

Without an Attorney

A DIY uncontested divorce is the cheapest option. You and your spouse submit paperwork to your local family court, then fill out and file required documents.

There are different packages typically available, starting at as little as $150 for an online divorce and going up into a few thousand dollars if you’d like support with filing and/or need some mediation.

With an Attorney

A lawyer can only work with one client at a time, so two attorneys are required if both spouses want their own representation.

A divorce attorney will usually ask for a retainer, or down payment, starting at $7,000 as of 2026. If the retainer runs out, the lawyer may bill by the hour. Hourly fees range from $260-$450, but charges of $500 or more per hour are possible, depending on where you live and other variables.

Of course, the longer it takes to reach a final judgment, the higher your attorney fees will be.

Recommended: Understanding Divorce and Retirement Accounts

Mediation

If you’re dealing with a more complex situation and don’t feel comfortable filing yourself, but you don’t want to shell out money for a divorce lawyer, you could consider working with a mediator.

In this form of divorce, both spouses work with a neutral third party who has a handle on the financial and legal aspects of divorce and oversees the process.

A non-attorney mediator may charge $3,000-$8,000 on average per case.

No-cost or low-cost mediation services are often provided by courts, nonprofit organizations, and bar associations.

Collaborative Divorce

In this hybrid of mediation and a traditional divorce using lawyers, each spouse is represented by a collaborative divorce attorney. The goal is to help both parties work toward a mutually satisfactory outcome and, if children are involved, one that keeps their best interests in mind.

Both parties commit, in writing, to using cooperative dispute resolution techniques.

If the process fails, both attorneys must withdraw from the case, and the couple will need to hire new lawyers and continue through family law court proceedings.

Consulting Attorney

If you can’t afford to hire a full-scope divorce attorney, you might be able to hire a consulting attorney for specific tasks. The average total fees for consulting attorneys are about $4,600.

Who Pays for the Divorce?

Most of the time, each spouse pays their own attorney fees and costs.

In select cases involving income disparities or one party unnecessarily complicating the proceedings, a judge may order a spouse to pay his or her partner’s divorce costs.

The following are some of the factors that affect the costs of a divorce.

How Child Custody Impacts Divorce Costs

In a contested divorce, the issue of child custody will likely come up. If the couple is able to agree on a child custody schedule that works for both parents, that is usually the easiest path forward.

For divorces involving children that require an attorney to iron out custody details, costs tend to increase significantly due to the additional time spent working with parents to reach an agreement.

A contested divorce involving custody could also include working with a court-assigned professional, who may interview the parents and children, observe each parent at home with the kids, and make an evaluation based on their findings.

A county custody evaluation could cost between $2,000 and $5,000. A private review could run over $30,000 for contested cases.

Property Division

Couples who share a property may require the help of real estate attorneys or agents who focus on helping couples ascertain the disposition of their homes.

A home appraisal is an unbiased, third-party estimate of a property’s value. As of 2026, it typically costs between $300 and $600, reaching $2,000 for larger houses.

Sometimes couples opt to refinance the mortgage on the marital home into one name, releasing the other spouse from obligation. The cost of refinancing can be in the thousands of dollars.

Alimony

Another potential consideration in a divorce may be alimony, or spousal support.

If both individuals can’t agree on the amount of payment and the time payments are to be made, the court may have to step in.

That can involve litigation and a review of debts and finances. Since the process requires legal counsel, alimony decisions can quickly drive up divorce expenses.

Paying for Divorce: Are Payment Plans Available?

Some family lawyers do offer payment plans. The time to ask about that is during an initial consultation so you can be aware of and prepared for the expenses ahead.

In most situations, paying for a divorce can be a major stressor.

If you and your spouse are on amicable terms and have savings, you could consider pooling together as much as you can to put toward divorce costs. You could also ask to borrow money from relatives or friends. In some cases, couples may know that divorce is looming and start saving for it ahead of time, as unpleasant as that may be.

Some people may opt to put their divorce costs on a credit card and pay the debt over time, with interest. An option that may be more cost-effective is a personal loan.

A personal loan has several potential advantages. The interest rate for a personal loan could be lower than a credit card, depending on your credit score. Most personal loans come with a fixed interest rate, which makes budgeting easier.

You might use a personal loan calculator to make crunching numbers a snap.

Typically, you have between one and seven years to repay the principal plus interest. This can allow you to borrow a significant amount of money and have several years to pay it off.

Recommended: How to Apply for a Personal Loan

The Takeaway

Divorce costs typically run well into the thousands, with a median currently being $7,500 and the average being $12,900. There are potentially less expensive options for those who have a simple, uncontested divorce and are willing to bypass lawyers and DIY the process. But if there are issues such as alimony, child support, child custody, and division of property to wrangle, you are likely going to need a considerable sum of money for the costs. Divorce financing options can include credit cards, funding from savings or family members, and personal loans.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

How much does a divorce cost on average?

As of 2026, the average cost of a divorce is $12,900, and the median is $7,500. However, the total cost of a divorce can vary depending on factors such as state attorney fees, whether the divorce is contested, and whether the couple has children or shared property.

What is the cheapest way to get a divorce?

For a simple, uncontested divorce, handling the process yourself (DIY) is usually the cheapest option. Online divorce packages can start from as little as $150, rising to the thousands for situations that require help with mediation and filing.

What factors influence the cost of divorce?

Several factors can affect the cost of a divorce, such as child custody, property division, and alimony. A simple divorce on amicable grounds can be relatively fast and inexpensive, while a contested divorce can drag on, increase legal fees, and become quite complicated and expensive.

Can I get a divorce without a lawyer?

In some situations, it is possible to DIY a divorce. This usually happens when the couple is in agreement on all matters, such as child custody and the division of property.

Is mediation cheaper than hiring a divorce attorney?

Yes, mediation is typically cheaper than hiring a divorce attorney, with mediation costing $3,000-$8,000. Working with a divorce lawyer can often cost in the five figures.

Who typically pays for the divorce?

In most cases, each spouse pays their own attorney fees and other divorce costs. In rare instances, there might be a judgment for one spouse to pay some or all of the other spouse’s divorce costs.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

This article is not intended to be legal advice. Please consult an attorney for advice.

SOPL-Q326-068

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Installing solar panels on your home allows you to do your part for the planet while also reducing your monthly utility bills. However, the cost to purchase panels and have them installed can be a deterrent. Even if you know you’ll save money over the long term, it may be hard to come up with the funds to pay for the project up front.

Fortunately, there are tax incentives as well as financing options that make paying for a solar system a lot more manageable. Solar financing involves using instruments, such as loans and leases, to pay for a solar system in installments over time rather than in one lump sum at the time of purchase. Each financing option has different features, advantages, and drawbacks.

Read on to learn more, including how much solar panels cost today, how much they can help you save, and what solar financing options can help you cover the initial bill.

The Cost of Solar Panels

The cost of solar panels varies by location, the type of solar panels, and the system’s size, but the average cost of a residential system is currently $20,534. The actual cost of solar panels can vary greatly depending on location, house features, and size of system. However, state and local tax incentives and rebates can lower the cost.

There are also different financing options available that allow you to pay for a solar system in installments rather than in one lump sum up front. The monthly amount owed on a solar loan can be less than an average utility bill.

Recommended: Strategies to Lower Your Energy Bill When Working From Home

Potential Benefits of Solar Panels

While solar panels have the potential to save homeowners money and do a lot of good for the planet, they come with a high price tag. Solar power financing can help make solar energy possible for more people, but not everyone qualifies.

Even if your solar panels don’t eliminate your electric bills, they can lead to significant savings. Generally, the initial expense of the purchase of a solar system can be recouped in 5-15 years, depending on energy costs in your state. After recouping installation costs, the amount you’ll save over the life of your panels will continue to add up.

Another benefit of solar panels is the potential to increase the resale value of your home. Research has shown that homes with solar panels can sell for 5%-10% more than those without them.

For some people, one of the biggest benefits of installing solar panels, however, is knowing that they’re using renewable energy and helping to reduce greenhouse gases. This could especially be important for those living in a state where the majority of the energy generated is through nonrenewable power sources.

Recommended: How Much Does It Cost to Remodel or Renovate a House?

Potential Drawbacks of Solar Panels

While solar panels have the potential to save homeowners money and do a lot of good for the planet, they come with a high price tag. Solar power financing can help make solar energy possible for more people, but not everyone qualifies.

Another drawback to solar energy is that it is sunlight dependent. If there is a long stretch of overcast weather, or if you live in an area that doesn’t get a lot of sun, you might not be able to generate enough solar energy to take care of your energy needs. However, solar batteries (which store excess energy) can help mitigate this issue.

Solar panels and the wiring they require can also use up a significant amount of space. Depending on how many panels you need for your home, it can be difficult to find adequate space with sufficient sun exposure to install a solar system.

Also, keep in mind that uninstalling a solar system and moving it can be difficult and costly. As a result, a solar system is not something you can generally take from house to house. It’s best to consider it as an investment in your home.

Saving Money by Installing Solar Panels

More than six million homeowners in America currently have solar panels. One reason is the savings it can offer over time. Once installed on your roof, solar panels typically last for more than 25 years. Hypothetically, if your solar system eliminates your electric bill and you normally spend about $150 a month on electricity, that would bring in a potential savings of $45,000 over the life of the system.

Keep in mind, however, that solar panels don’t always eliminate your electricity bill. And, as with any home improvement project, it’s important to consider the upfront costs, how long you plan to live in your home, and if you can find home improvement financing options that work with your budget.

Four Options for Solar Panel Financing

While converting to solar can pay for itself over time, it requires a sizable upfront investment. Here are some options that can help make it easier to foot the bill.

1. Tax Credits and Rebates

A smart solar power financing strategy starts with taking advantage of all available tax credits and rebates. The federal government offered a 30% tax credit for solar panels that, unfortunately, expired on December 31, 2025. But if you installed solar panels before that date, you still qualify for the tax credit.

Unlike a deduction, a tax credit is an amount of money that you can subtract, dollar for dollar, from the income taxes you owe. So, if you pay $30,000 to install a new solar system, you’ll qualify for a roughly $9,000 tax credit, which equates to $9,000 more in your pocket.

In addition, many states offer rebates that further reduce the cost. To help people learn more about state and local incentive programs, North Carolina State University’s NC Clean Energy Technology Center offers a nationwide directory of programs.

2. Solar Panel Leases

A unique option for solar panel financing is a solar lease or power purchase agreement (PPA). With a lease or a PPA, a company installs the solar system on your roof, and you pay that company for your energy each month, which is typically 10%-30% lower than your usual electric bill. The company owns the panels and remains responsible for any required maintenance.

Since you don’t own the solar system, however, you can’t take advantage of any tax rebates or other incentives that come with purchasing solar panels outright. Also, solar lease and PPA contracts can extend for 20 years. If you want to move before the contract is up, you would need to find a buyer who wants to take over your contract or could end up paying a hefty cancellation fee.

3. Secured Solar Panel Loans

Since you are adding to and improving your home, you might consider using a home equity loan or home equity line of credit (HELOC) to finance solar panels. This type of financing is secured by the equity you have in your home. Because the debt is secured (which lowers the risk to the lender), you may qualify for a lower interest rate. However, if you are unable to repay the loan or credit line, the lender can take your home to recoup its losses. Also, you need to have equity in your home to qualify for a home equity loan or HELOC.

4. Unsecured Solar Panel Loans

An unsecured solar panel loan is an unsecured personal loan that you can use to purchase solar panels. You don’t have to have any equity in your home or use your home as collateral to qualify for an unsecured solar panel loan. To get approved, the lender considers your income and your credit rating (among other financial factors that vary from lender to lender).

With an unsecured personal loan, you receive a lump sum up front, which you can use for virtually any type of expense, including solar panels. These loans typically have fixed rates so your monthly repayments stay the same over the term of the loan, which is often one to seven years. Because this type of solar panel financing is unsecured, rates can be higher than you might get with a home equity loan or HELOC.

The Tax Benefits of Solar Panels

There was a 30% federal tax credit for solar panel systems installed between 2022 and 2025. That is no longer available, but there are still state-level solar incentives and policies, which vary widely. You can look up what’s available in your area in the DSIRE database, operated out of North Carolina State University. Your local utility may also offer clear energy incentives, which can help you save money on solar panels.

The Takeaway

There’s no question that solar panels are environmentally friendly. Over time, they can also be economically friendly, saving you money on your electricity bill. Doing some research about residential solar panels and general home improvement financing is a good step to take to see if it’s the right choice for your home.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

✓ Checking your rate will not affect your credit score † .

FAQ

How much does it cost to lease a solar panel system?

According to Consumer Affairs, the average lease cost for solar panels runs between $150 and $250 per month. The amount you’ll pay will depend largely on the size and production of the system.

How much can you save using solar panels?

According to Consumer Affairs, the average homeowner saves $25,000-$90,000 over the 25-year lifespan of their solar panels. However, savings depend on a number of factors, including where the home is located, the size of the system, and the roof position.

Is there a tax credit for installing solar panels?

Currently, there is no federal tax credit for newly installed solar systems. The previous tax credit ended under the One Big Beautiful Bill Act of 2025. However, there are various state-level tax incentives.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

SOPL-Q326-063

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