By Elizabeth Weiss
When you’re in
the middle of a divorce, it’s hard to think about anything
but the present. Immediately post-split, things can seem dire for your
wallet and savings. But the future is also an issue. What will your finances
look like when you’re ready to retire? Will you even be able to retire? Even if
your most pressing concern is how to pay the bills next month, make it a priority
to plan for retirement as you’re divorcing.
Start at the
beginning
Maybe you
weren’t the breadwinner in your marriage, or perhaps your spouse took care of
the bills—no matter, now is no time to plead ignorance. Get educated ASAP about
your assets, debts, income, and expenses prior to filing for divorce. And make
sure you understand the true value of your assets and investments to avoid
regrettable and costly mistakes. “A $500,000 house may not have the same value
as $500,000 in stocks or even rental property due to tax implications, market
volatility, or other factors,” says Lisa Helfend Meyer, certified specialist in family law
and founding partner of Los Angeles-based Meyer, Olson, Lowy and
Meyers.
Seek help
Should you work
with a divorce financial analyst? “Having experienced professionals on your
side is indispensable. The more information a client can put together
beforehand, the easier it is to immediately start crafting a strategic plan,”
says Meyer. But the burden of figuring out your financial future isn’t only on
you as the divorcing party. Many legal teams work with forensic accountants and
other financial consultants to characterize, value, and divide property.
Prepare for the
unexpected
While married
life sustains its fair share of curveballs, the same is true with divorce, and
the settlement you end up with may not stay the same forever.
“People lose
jobs, get sick,” says Tanya Helfand, divorce attorney with Helfand &
Associates in New Jersey. “Even if you have a
contract, the courts are sensitive to the fact that life changes. You have to
prepare.” Which means, if you’re counting on alimony to pull you through the golden years, don’t.
Be prepared to
save
Many divorcing
individuals come into their attorney’s office unprepared to manage the costs
ahead of them for the divorce, let alone life from here on out.
If “budget” was
a foreign word to you in the past, consider it a prominent part of your
vocabulary now. “I counsel clients on the importance of saving a portion of
their support. For the supporting spouse, we try to limit or reduce the amount
and length of support. For example, if they pay higher support for a shorter
time, this may free them up in later life,” says Meyer.
Know what you
want
Knowing what
you want in your divorce can help expedite matters (if you are so inclined),
and being willing to bargain can give you an edge. “Any retirement accounts
acquired during the marriage are subject to being split between the spouses,
either at retirement age or sooner. If there is a 401K, you could even split it
right now without any tax-effect and get the money during the settlement,” says
Helfand. “If someone has a pension, and there are other assets, we value those
pensions using actuaries and then you can off-set it. For example, if there’s a
house involved, you could theoretically split them: He keeps his pension and
she keeps the house, assuming the values are the same.”
If you can work
through these financial issues ahead of time, you may even be able to get an uncontested divorce, saving yourself all kinds of money
that would otherwise get spent in court battles.
Acknowledge
limitations
Taking the
long-range view of your financial future and where you will be in 10 or 20
years is essential. “Financial settlements take on heightened importance when
the supported spouse has limited earning power after being out of the workforce
for years or the supporting spouse has fewer years to work,” says Meyer. And if
you’ve been a stay-at-home parent for the duration of your marriage, you are
now in a tenuous position. Meyer’s recommends that supported spouses negotiate
for a well-rounded portfolio of assets that would include a residence,
retirement, and non-retirement financial accounts. It’s also a good idea to
negotiate for support beyond the other spouse reaching the age of retirement.
Plan for the
worst
Of course as
people near retirement age, their health and wellness can change along with
their job and financial status. Worst-case scenarios can and do happen.
“Imagine you have young children and are receiving child support, or that you
are in your 50s or 60s and receiving spousal support and something happens to
your ex. You could find yourself suddenly without income,” says Meyer. “Having
a requirement in your settlement that your ex maintain life insurance to ensure continued support payments upon his or her
death could save you from possible financial devastation.”
Think clearly
Divorce is an
emotional roller coaster, and it’s possible to make some decisions along the
way that could negatively impact your retirement. “This is the time to lead
with your head and not your heart. Don’t allow feelings of guilt or the desire
to extract revenge cloud your judgment or make you lose sight of your long-term
financial goals and needs,” says Meyer. For example, you may be attached to the
family home, but can you qualify for a mortgage on your own and afford the
taxes and upkeep? Take emotion out of things and stick to dollars and cents so
your retirement is a comfortable one.
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