By: Michelle Buonincontri, CFP®, CDFA
A laterlife divorce can wreak havoc on even the most well-thought out retirement plan – as there is little time to amass assets and recover from the loss of previously anticipated retirement income.
“Gray” divorces — among couples 50 and up, or “Boomers” – have been on the rise, with about 25% (one in every four divorces) occurring to people over the age of 50 according to a study by the National Center for Family and Marriage Research at Bowling Green State University . It has been said that 50% of first marriages end in divorce, and the numbers are even higher for second and third marriages
So what can you do?
During this time, managing expectations is paramount. The income that once supported one household, is most likely now supporting two. A spouse may need to consider working longer (delaying retirement), modifying living expenses and discretionary spending. Many times, one spouse may be entering the workforce – either again after many years or even for the first-time. Life will be different post-divorce. This can be scary and stressful, and decisions tend to me made on emotions rather than facts. Ensure you have others in your life to help support you during this difficult time. Consider Mediation as a resolution alternative, maybe join a support group or yoga, be “mindful” of emotions, and try to keep “healing” as a central theme as you weigh choices.
Create an Asset Inventory
Unfortunately, the spouse that was non-working, “less-monied” or the care-taker – suffers the most financially in a divorce, as they have less saved for retirement. Understand that all marital assets can become “potential” retirement assets; even ambiguous employment benefits such as bonuses, stock options, deferred compensation, health benefits, the future income stream of pensions, and Health Savings Accounts (H.S.A.’s). If these assets aren’t specifically identified, or you don’t understand them, the success of a retirement plan may even be compromised – as there is no “re-do” in divorce.
Understand the Value of What you Are Really Entitled to
Decisions regarding the identification of marital & separate property (and their growth during the marriage), retirement asset valuation, asset division and tax implications become so important as pension benefits and social security will be less in a single household, and health-care costs may now become a concern (whereas before they may not have been due to spousal benefits). Pensions and Social Security benefits increase the likelihood of successfully meeting your needs in retirement and are considered “safer streams of income”, so they are an important part of your plan after divorce. All these need to be considered in the Divorce planning process as they have a large impact on the success of your new post-divorce retirement plan.
Working with ac CDFA™ (Certified Divorce Financial Analyst) can help with understanding the short and long term cash-flow and net-worth effects of various options and settlement scenarios – so that decisions can be made that minimize the financial impact on a retirement plan and provide longer term peace of mind.
Both the IDFA (Institute for Divorce Financial Analysts) and the ADFP (Association of Divorce Financial Planners) can be resources for finding a CDFA™ (Certified Divorce Financial Analyst) professional to support you during this time of transition.
This article originally appeared on LinkedIn.
Michelle Buonincontri is the Founder of Being Mindful in Divorce. She’s a divorced single mom, passionate about using her professional experience as a CFP® & CDFA™ and personal journey to support women in transition; creating confidence through education so they can make financial choices with peace of mind. Bringing together a background in investment management, tax prep and retirement planning, to provide Divorce planning (with singles or couples) and Financial Coaching services, financial literacy workshops and writings.