Don’t Let Divorce Wreak Financial Havoc
Divorcee rates of people over 50 have practically doubled in the past 30 years. This rise in so called “grey-divorce” is due to many factors - not the least of them being the over-50 population is only growing as baby boomers age. Divorce is deeply personal decision that can affect your life dramatically. The last thing you want it to do is lose you your retirement. In fact, late-in-life divorce has a habit of leaving the divorcee, especially the female divorcé, financially unstable.
From car insurance, to social security, to healthcare, to credit cards, divorce requires uncoupling your financial life- not to mention the cost of living separately versus jointly. Here are some tips to keep the cost of divorce, during and after the preceding, in check.
- Settle out of court. In hotly contested divorces where anger and other emotions run rampant, legal fees can quickly eat into assets that could have been used for other things.
- Keep emotions out of it. Divorce can be extremely emotional. While, for the sake of your mental health, you should not repress your emotions, don’t make hasty financial decisions in an emotional state. When in doubt, find a financial advisor you trust to help protect your financial future.
- Learn your personal financial matters. In many marriages, one partner takes charge of the family finances because it is convenient, but that can mean the other partner is left in the dark about the overall financial picture.
- Deal with debt strategically. If you and your soon-to-be ex-spouse have joint credit cards or other revolving debt, start paying down your account balances as soon as possible because you are both equally liable for that debt in the eyes of the creditor.
- Alimony vs. child support. If you receive alimony or other payments, it does not necessarily mean you can afford a mortgage payment on a single income. Additionally, with credit standards tightening, your credit score or income may not be high enough to qualify for a loan.
- Don’t forget retirement. Before deciding whether to claim a percentage or lump sum of your soon-to-be former spouse's retirement plan, it is usually a good idea to get a qualified domestic relations order, or QDRO. A QDRO is a court order that creates or recognizes your right to receive all or a portion of the benefits payable under your ex-spouse's retirement plan.
Though some find it distasteful, it can be smart to plan your finances with the possibility of getting a divorce in mind. Often, women over 50 don’t have saving of their own, it’s important that you maintain your on finances in the case you won’t have access to your spouse’s. For the spouse that took on a provider role during the marriage, know your state may require you to split your assets in half, make sure you have enough to retire even after.
For more help with splitting your assets evenly and fairly, divorce planning or distributing wealth, Hughes Warren has trained financial advisors that can ease the transition and eliminate confusion.