You have been saving for your retirement with your spouse and then either you or them determine that you need a divorce.
What happens next?
That balanced plan between both of your assets that may have included his/her pension plan and healthcare benefits is no longer valid.
This can be a huge issue for some, but understanding your situation and how a divorce can affect your plans is the first step to taking action to protect your dream retirement.
Did you know that the average divorce costs upwards of $10,000 in Michigan?
Not to mention setting up two homes and any child or spousal support.
On Your Own
Now that you are on your own or headed that direction, you need to be aware that everything that was joint is now yours alone to cover including:
- healthcare insurance
- rent or mortgage
- dining out
- home maintenance
Based on these items, you will most likely need more in retirement than you originally estimated.
Be sure to take a look at a budget tool or even just an Excel or Google Sheet to calculate your income less expenses to better understand your financial situation.
Divorce and Your Assets
Divorce is expensive and you are splitting everything based on the state's divorce laws. Most of the time any retirement assets are split 50/50 and that could include things like pension funds, 401ks and IRAs to name a few.
Then there is your home. If you own a home with your spouse there are some agreements that can occur to allow one or the other of you to stay in the home for many different reasons. This could complicate your retirement savings plan, so be sure to speak to a financial planner before entering into any agreements around your home.
Your expenses are now increasing. In addition to attorneys fees, you are now solely funding your living expenses and maybe those of your spouse and children. This can get expensive and you may not be able to save as much as you are used to.
Your Social Security Benefits
A married spouse, at age 62, can get their own Social Security benefits or fifty percent of their spouse's Social Security benefits at full retirement- whichever is greater.
That's a great benefit if you are a nonworking or lower wage earning partner.
This carries over if you are married for 10 years or longer and if you are not remarried. If you were married for less than 10 years or remarry then, this will no longer apply to you. Be sure to factor it into your planning.
There is a long list of items you need to complete at the end of your divorce proceeding including:
- Change beneficiaries on life insurance
- Change beneficiaries on retirement plans
- Update your estate planning documents including medical power of attorney
- Speak with a financial planner to discuss your strategy moving forward and estimate your new retirement needs and savings plan