Divorce and Retirement in Money Magazine

I was recently quoted in an issue of Money Magazine on divorce and retirement. Though the full article isn’t online, I wanted to give you a peek at some of the key points readers who may be considering divorce — or already in the thick of it — can take away from it.

Sell the House

After divorce, household income will likely decrease (around 23% for men and nearly double that for women.)

Getting creative with your monthly expenses is key – by downsizing your home, taking $500 in savings each month and investing it with a 5% return over the next 10 years, you’ll have $77k in retirement savings.

Sell the house, save the money and stash it away where it will give you the biggest bang for your buck.

Focus on the Income

With property and assets in a divorce, there’s often more than meets the eye. I shared in the full article that a 401(k) valued at $500k (where 100% of withdrawals are taxed at ordinary income rates) is probably worth much less than $500k in a taxable investment account, where only the gains are taxed (at advantageous rates.)

Your best bet is to hire a financial professional to help you understand the today – and tomorrow – values of all the chips on the table, and determine the cost of your immediate and long-term needs. (I’m always available to provide advice on getting the most out of your divorce and retirement — send me a message and we can talk.)

Do the Division

Terms for your divorce have been established – but you still need to do the work before receiving these assets.

As the article reminds, dawdling can be dangerous. For example, a Qualified Domestic Relations Order (QDRO) will be necessary to divide retirement investments like a 401(k) or a pension, but not an IRA. Make sure you understand and follow up on the paperwork and processes required for you to receive assets awarded you.

It’s true: Divorce doesn’t have to spell disaster for your retirement. In fact, I offer several helpful hints for getting the most out of your divorce and retirement in this free, on-demand webinar. View the free webinar now!

Paying College Tuition for Children after Divorce

Your child: A source of pride and joy, life and love and, yes, quite a few additional expenses. Multiply all of the above when you bring more of them into the world — and you start to look like one very proud, very happy, very financially taxed parent.

Divorcing couples often come to me and say, “Tracy, we’re going through a divorce — but we want to be certain our child’s college needs are met.” In some conversations, such as the question we get from listner, Stephanie, the wife wants to make sure her children know she’s a contributor to their college funds.

In today’s episode of the Divorce Insider Podcast, I explore a few suggestions to Stephanie’s concerns about transparency of funds for college expenses — and ways you and your spouse can cooperatively address your children’s tomorrows amidst your divorce.

And remember: If you have a question about divorce and money you’d like me to contribute on the Divorce Insider Podcast, head over to my online contact form to ask me anything. I’ll make sure to send a response your way and feature your question on a future episode of the show.

Notes from today’s episode:

  • Consider a 529 Plan: No matter whether or not you and your spouse are going through a divorce, a 529 Plan is an investment account designed to help you save money for your children’s college expenses. Like a Roth IRA, you can contribute funds to your 529 without any annual income taxes. Read more about 529 Plans on SavingForCollege.com
  • Contributing community property to college savings: Before the divorce, you and your spouse can work cooperatively to move funds to a joint savings or investment account that will provide for your children’s college needs. This way, it’s community property and jointly contributed, and you both will have greater transparency about the use of funds with both names attached to the account.
  • Foster communication during and after divorce: Clear communication and well-established expectations will ensure your children are provided for as they head for college. Collaborative divorce is a great way for divorcing couples to establish and/or reinforce healthy communication strategies to cooperatively address the post-divorce needs of their children.

Divorcees Can Deflect Destitution

canstockphoto22439542 happy older woman with dollars“You’ve got to help us!” Those were the words from a College Station woman who came to me for financial advice years ago. She asked me to help women in divorce. She described the divorced neighbor in her apartment complex. This neighbor was the ex-wife of a doctor and to make ends meet, she was a house cleaner for her wealthier former neighbors. Back then I didn’t realize that divorce attorneys don’t give financial advice.

In September 2015, the Census Bureau reported that the poverty rate for women aged 65 and older is still 12.1% while the poverty rate for men is just 7.4%. Nearly twice as many older women than older men are living in poverty. A fair divorce settlement can be the difference between poverty and a financially secure life.

Getting good professional advice and taking an active role in your divorce process will go a long way in helping you avoid a reduced standard of living later in life. If you are a woman facing divorce, you need to get sound financial advice before, during and after your divorce. Divorce can be very complicated, especially in long -term marriages. Look for a CPA with gobs of experience helping women in divorce.

Hire a family law attorney with experience. You don’t need the most expensive lawyer and stay away from low cost lawyers. Your friends might give you attorney names, but their advice will likely be based on their own divorce and not on your unique needs. Your divorce is not your friend’s divorce. Like Goldilocks, you need the one who is just right. Contact me for my list of the most suitable Brazos County divorce lawyers for your individual needs.

What’s Different about Divorce after 50?

What's Different about Divorce after 50?

I’ve talked before about grey divorce and how divorce after 50 could affect retirement, but there’s more to the complexity of divorcing later in life than just retirement.

In today’s episode of the Divorce Insider Podcast, I share several considerations couples over 50 need to make as they’re untying the knot. Some of these include:

  • Will you have time to rebuild your retirement nest egg?
  • What should you do for health insurance and healthcare?
  • How much will your life-long dreams change as a result?

The cost of living for each of you adds up to more than the cost of living for the two of you when you’re together. Tweet this

In this episode, I share some practical tips and considerations you and your divorce professional should be discussing, including the need to project your post-divorce budget and ways to make sure you have health coverage after your divorce. I also answer a question from a listner who is wondering about what to do with credit cards during a divorce.

Practical advice for divorce financial planning

Divorce is an intricate mixture of parting ways, moving forward, looking ahead and building for your tomorrows. The real trick is having a strong financial plan at the ready — and that’s exactly what I talked with Andrea Murad in her article about divorce and financial planning, which was published on Entrepreneur on July 10.

You can read the full article here — or hit the highlights in my summary below. Andrea gives five practical tips for developing solid financial plans amidst divorce, which include:

  • Reviewing your financials and expenses
  • Budgeting for alomony
  • Planning your career
  • Considering whether to downsize your home
  • Remembering to consider health insurance

The key to planning effectively is taking stock of who you are and what you’re worth now, what you’d like to maintain moving forward, prioritizing your needs and wants, and deciding what steps will need to be taken to get there.

Andrea consulted with several professionals from across the financial planning spectrum, and all had valuable insight in how you can maximize your finances before and after your divorce. Give the article a read and let me know what you think.