IT’S ALL IN YOUR HANDS
A Post-Divorce Action Plan
You have just gone through
one of the most challenging and difficult periods that a woman can experience in her life – a divorce. While
many things may still be in up in the air,
one aspect of your life that you should
make sure you’re in control is your finances.
Financial
planning for divorced women is not that much different than financial planning
for married couples. Several
basic elements are the same. However, the
differences offer both good news and bad news. The good news: you can make plans
and decisions based solely on your needs and goals. There won’t
be miscommunication or conflicting ideas. The bad news: it’s all in
your hands. Any mistakes will be your own and a
poor decision can’t be salvaged by the income or assets of a partner.
The
following post-divorce action plan offers a few things worth considering:
One
way to counter the bad news is to find a trusted professional to seek advice
from.
After
a divorce, friends are often split between spouses. Financial
representatives can be the same way. If you lost yours in the
divorce or never had one to begin with, it’s a good time to consider finding a professional who can help
you make sound financial decisions for your new life.
To find one, start simply. Ask friends or
acquaintances who it was that helped them when they went through a divorce. The
attorney who handled your divorce may also be a good source for a referral.
It’s important to have someone help you who has previously assisted or - best of
all - who specializes in helping divorced women.
Selecting the right financial professional
for you is a critical step. After all, this person will be helping you with the
important financial decisions you now have to face.
Long-term care insurance may
become even more important post-divorce.
Long-term care policies are
designed to cover the costs of care if you are unable to care for yourself
because of age or if you become
ill or disabled. Long-term care
is especially
important for women because they typically pay more for it than men do. The reason is simple: women typically live longer than men and usually require longer care during
those additional years.1
A
woman’s retirement is usually more expensive than a man’s.
The reason that women usually need long-term care insurance
more than men is the same reason that retirement income planning for women may be more
important.
Women live – on average - 5 to 10 years longer than
men. Eighty-five percent of people over 100 are women.2 This
means a woman’s retirement
savings must, on average, be stretched out over a larger number of years.
While,
in general, retirement planning for a
single person is easier in many ways than for a couple, remember … you can no longer rely on a
spouse's financial resources if a mistake is made. It’s important to review
your social security estimates, any pensions you have and your retirement
assets. You can then compare
that to the kind of lifestyle you would like to have
during retirement.
Because retirement may be more
expensive, you
may want to make an employer-sponsored retirement plan a larger deciding factor
in any job search. Also, you may decide that you must retire at a later date than you had originally planned.
Update
your beneficiaries and consider using a trust to help manage your assets. People
often forget to update the
beneficiaries of their life insurance and retirement accounts after a divorce.
If not changed, your ex-husband may stand to inherit a large portion of your assets.
Also, the estate laws give
certain breaks to married couples that are not available to a single person.
Establishing the proper type
of legal trust may be a way to pass
along more of your assets to your heirs,
rather than to the IRS.
Finally,
after you have moved on from your divorce there may come a time when you consider
remarriage. It’s
important that you understand the financial effects this may have. If you
were married longer than 10 years you may be collecting or entitled to 50% of
your ex-husband’s social security benefit. If
you remarry you will no longer have that right. While you will become
entitled to your new husband’s benefit, you must know if your new husband’s benefit
will be lower or higher, and
how that will affect your retirement.
Remarriage can also lead to blended families, blended assets and blended income. Your new husband may have his own family from
a previous relationship. A financial professional can help the two of you
prepare for this blending that satisfies the financial needs of each of
you, as well as
your new family.
While it’s all in your hands,
partnering with a financial
professional can help you move on to the next phase of your life with a
more solid plan for your financial future.
These
are the views of Peter Montoya, Inc., not the named Representative or
Broker/Dealer, and should not be construed as investment advice. Neither
the named Representative or Broker/Dealer give tax or legal advice. All
information is believed to be from reliable sources; however, we make no
representation as to its completeness or accuracy. Please consult your
Financial Advisor for further information.
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