Divorce is hard. On top of the emotions, it brings a lot of money questions. Your household income may change. Retirement savings may need to be split. And money decisions you once made together may now be yours alone.
It can feel like a lot. But it’s also a chance to take a fresh look at your finances and make a plan for the road ahead. You don’t have to figure everything out at once. Taking it one step at a time is a great place to start.
What should I do first?
Start by getting organized. Gather information on everything you have and everything you owe: bank accounts, investments, retirement accounts, insurance policies, your home and other property, and any debts.
Next, make a simple budget for life after divorce. Your income, housing, insurance, and other bills may look very different now. Knowing your new numbers will help you make clear, confident decisions.
How will divorce affect my retirement?
Divorce can change your retirement plans in a big way. Savings built up during the marriage, like 401(k)s, IRAs, and pensions, may be split between you and your former spouse. How they’re split depends on your state’s laws and the details of your divorce.
You may also have a right to part of your former spouse’s retirement savings. To split some workplace retirement plans, like a 401(k) or pension, the court has to approve a special legal order called a QDRO (qualified domestic relations order). Your attorney can help you with this step.
How can I protect my retirement?
It’s natural to focus on what you need right now. But try not to give up long-term security for a short-term fix. Two things that are worth the same amount today may not help you the same way down the road.
For example, keeping the house may feel like the right choice. But a home comes with ongoing costs like repairs, property taxes, and insurance, and it isn’t easy to turn into cash. Taxes matter, too. $100,000 in a traditional retirement account is not the same as $100,000 in a savings account, because you may owe taxes when you take money out of the retirement account.
Before you agree to a settlement, think about how each piece will affect your future income, your taxes, and your ability to keep saving.
Should I update my beneficiaries and estate plan?
Yes. This is one of the most commonly missed steps. Your ex-spouse may still be listed as the person who would receive your retirement accounts, life insurance, or bank accounts if something happened to you. Check each account and update it.
It’s also a good time to review your will, power of attorney, and health care documents with an attorney. Keep in mind that changing your will does not change the beneficiary on a retirement account or insurance policy. Those have to be updated separately, directly with each company.
Can I get Social Security from my ex-spouse’s work record?
You may be able to. If you were married for at least 10 years, you may qualify for benefits based on your ex-spouse’s work record. In general, you need to be at least 62 and not remarried, and your ex-spouse needs to be eligible for Social Security. If your ex hasn’t started collecting yet, you can still apply as long as you’ve been divorced for at least two years.
Here’s some good news: collecting on your ex’s record does not lower their benefit, and it doesn’t matter whether they’ve remarried. If your ex-spouse passes away, you may also qualify for survivor benefits.
When you start collecting can make a big difference in how much you receive, so it’s worth looking at your options before you apply.
Who can help me through this?
Divorce brings a lot of money decisions, and many of them will affect you for years. It helps to have the right people in your corner. An attorney can guide you on the legal side. A tax professional can help with taxes. And a financial advisor can help you look at your savings, investments, insurance, and long-term goals.
Most of all, don’t wait to take charge of your finances. Divorce may close one chapter, but it can also be the start of a plan built around your goals and your future.
How can Focus Financial Group help?
You don’t have to do this alone. We’ve helped many women through this season, and we know how overwhelming it can feel. We’ll take the time to listen, help you understand where you stand today, and work with you on a plan for the years ahead. When you’re ready, reach out. We’re here to help.