Women, divorce and retirement: Divorce puts retirement on hold

By Mary Helen Gillespie

‘Shannon’, 61, from New Hampshire, describes the financial lessons learned after her 33-year marriage ended.

What was the financial impact of your divorce on your retirement plans?

Drastically. I don’t really have any retirement plans.

Did you hire a financial advisor, CPA or other financial professional to help you plan for your retirement needs during the divorce process? Would you do it today?

No, but I would if I divorced today.

Was your divorce lawyer concerned about your retirement finances? Was the divorce judge?

My divorce lawyer was supportive of my retirement status. The judge was not.

How would you describe the quality of your financial life after divorce?

I worked part-time throughout my 33-year marriage. Today, my financial situation is much weaker than when I was married.

What other information would you like to share with women in similar situations?

Be sure to check his pension (if he has one).

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Retirement Daily shared Shannon’s story with Deanne Phillips, CFP®, CDFA®, ABFP℠, Director of Client Learning and Development at Annex Wealth Management. Here are her thoughts for Shannon and other women facing similar issues.

First, the good news: the overall divorce rate in the United States is falling. Now the sad news: the rate of “grey divorcees” is on the rise – double the rate in 1990. Today, couples over the age of fifty account for 25% of all divorce cases.

“Older” can mean “less simple”. Since many older couples have accumulated more complex wealth, separating assets could be trickier, especially for someone about to retire.

Divorce is often accompanied by many emotional traumas. And when divorce happens to older women, their standard of living plummets by up to 45%. Few people want to feel pressured to go back to work at 65.

Add to these concerns the common sense that women have of being undereducated when it comes to their finances, the gender pay gap, and women outliving their physical partners, and you have discovered a formula for a crisis. potential personal budget.

Let’s face it – when you’re going through emotional distress during a transition, it can be difficult to focus on what your future will look like and the many financial decisions that need to be made in the present. Most people just want to “get it over with,” which leads to concessions that are later regretted.

Here are some tips for avoiding some common divorce problems:

Copy all financial documents and keep them in a safe place. This includes bank accounts, three-year tax returns, pension and investment statements, pay stubs, employment contracts or contracts, and any financial rewards like options for you and your spouse. Also have a copy of debts, loans, mortgages and bills. This can help save time and money going through a collection process later when it comes to reconciling income, assets and debts.
Give good consideration around the family home and consider whether to keep it. Whatever the motivation – whether it’s maintaining continuity with family, sentimentality (after all, that’s where memories were generated), or perhaps the idea of moving during the transition to divorce is simply overwhelming – remember that houses cost money to maintain, so cash flow becomes even more important. If financing is needed, speak with a credit professional first. Don’t assume you can take out a mortgage.
Understand the tax implications of all financial assets as not all of them are the same. It’s important to equalize assets from a tax perspective and know how the assets will be distributed and paid out – including any pensions that either of you have. This is where a financial planner or CDFA can help by presenting financial statements and showing how income and assets work for you after financial separation.
Ensure revenue sustainability. If you’re getting spousal support, get a disability policy on the payor if they’re still working, and a life insurance policy on them to make sure you continue to get paid for the length of time stipulated by the decree, no matter what happens to your ex-spouse. Be sure to include language in the marital settlement agreement regarding responsibility for paying these premiums, especially if your ex pays them, so they don’t lapse.
Understand your Social Security benefits. If you have been married for more than ten years (and not remarried), you are entitled to half of your spouse’s benefit or 100% of yours, whichever is greater. It doesn’t matter if they remarry and it doesn’t affect their benefits, so it’s not a negotiable asset in a divorce negotiation.
Tax filings in the year of divorce can be complex. Remember that a divorce is a change in circumstances that takes effect on the date the decree is stamped. You are then considered divorced for the whole year – even if it is December 31^st. You may be filing your taxes as a single person or head of household, but you may still have marital income for that year. Since income in the year of divorce can be complex, consider hiring a tax professional to help you.

And finally, even if people divorce themselves (pro se) and feel that they have a friendly enough relationship to do so with a mediator, we still recommend having a lawyer or someone to defend you. There are so many considerations and it’s important to have the right team at the time to ensure that you not only survive the process financially and emotionally, but also to help understand that one can thrive afterwards. This helps you see if everything will be okay. And ultimately, that’s what women want to know as they go through this process: Will I be okay?

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Learn more by watching our webinar, Retirement Daily Roundtable – Women, Divorce & Retirement: Creating Your New Personal Finance Plan, with Robert Powell and panelists Amy Shepard, Rick Fingerman and Katie Marsden.

To find a financial professional with divorce experience, visit Divorce Financial Analysts Institute website.