Divorce can have your worry focused on the present and immediate future, but what about five years from now? Ten? Thirty? What will your finances look like when it’s time for your kids to go to college, get married, or – most especially – when it’s time for you to retire? Will you even be able to retire the way you always dreamed you would?
Gary Plessl and Kevin Houser, certified financial planners and authors of The Book on Retirement: Are You Ready for The Second Half of Your Financial Life?, 10 ways you can plan for retirement after divorce and ease the financial impact of divorce on the rest of your life:
1. Establish a solid non-IRA cash fund.
Make sure you can weather a six- to 12-month storm such as an illness or job transition. Unfortunately, life has a funny way of throwing unexpected events at us at the wrong times, so be ready by having cash outside of retirement funds that you can access without penalty.
2. Change primary and contingent beneficiary information.
Make this switch on all retirement accounts, insurance policies, and all pension information so that they no longer include your ex, even if you’re still receiving spousal support.
3. Change your estate planning documents.
Focus especially on any clauses that might relate to, “If I die, then this happens….” If you get divorced but forget to make these important changes, your ex will still be able to make these important decisions if you’re not able to.
4. Review POA documents.
Make sure that all Power of Attorney (POA) privileges for your former spouse are revoked at all financial institutions.
5. Play catch-up, in a good way.
If you’re over age 50 at the end of the year, utilize the catch-up provision for 401(k) and IRA accounts. In 2015, for example, catch-up provisions on 401(k) accounts are capped at $6,000 and for IRAs it is $1,000.
The best way to prepare a budget for retirement is to establish a hierarchy of what’s important to you and allocate your dollars that way. Maybe you want more time to travel, money for your grandkids’ college education, or an extra cash reserve. Whatever it is, budget for and save specifically for these items.
7. Make trustee changes.
When it comes to a trust, remember that it is the trustees who must make the decisions about what happens to the property, not the settlors or beneficiaries. Carefully consider your future successor appointment and future trustee appointments.
8. Review Social security provisions.
You will be able to claim the greater of either your personal benefits or half of your former spouse’s when it comes time to collect Social Security, but you aren’t allowed to claim both. And if you remarry, you can no longer claim your former spouse’s Social Security.
9. Establish your own credit.
When you’re divorced, the last thing you want to do is keep joint financial accounts. Open your own bank accounts, get your own credit card, and work on improving your individual credit.
10. Hire a financial advisor.
You would be wise to seek out a financial advisor at the same time you hire a divorce attorney – don’t wait until after the divorce. Allow your financial and legal experts to work together to devise a fair settlement for both parties.
The financial element of divorce can be confusing and overwhelming, especially when you’re trying to deal with spousal support, child support, and the division of assets. Seek out the wisdom of an experienced Michigan divorce attorney. Contact Femminineo Attorneys in Mt. Clemens, MI, to schedule your no-cost initial interview today.