By Mary Helen Gillespie
“Maureen” from Ohio has found her post-divorce lifestyle to be financially, emotionally and mentally fulfilling. Here’s how she achieved those goals.
What was the financial impact of your divorce on your retirement plans?
As my income was cut in half after the divorce, I was finally in control. While I had to watch my finances closely and set a different budget, I no longer had to deal with my ex-husband’s spending sprees. After a year, I was in a better financial position because I was able to prioritize needs over wants. I saved each month for my children’s education and my retirement, foregoing expenses such as expensive cars and expensive home decorations that my ex-husband insisted on.
Did you hire a financial advisor, CPA or other financial professional to help you plan for your retirement needs during the divorce process? Would you do it today?
I hired a financial advisor after the divorce, and they were a great help to me. I highly recommend hiring a trusted professional for financial advice.
Was your divorce lawyer concerned about your retirement finances? Was the divorce judge?
No.
How would you describe the quality of your financial life after divorce?
My financial life was difficult because child support didn’t even cover child care costs. I had to watch every penny. Being in charge of my own finances freed me up and I started teaching my kids about the impact of small expenses like fast food.
What other information would you like to share with women in similar situations?
Do not despair. I ended up with a smaller house and a smaller car, but I was happy and so were my kids. As their father gave them expensive gifts, they told me they were happier staying home with me. Many gifts remained in their boxes until they were finally distributed. Today, I am in excellent financial shape.
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Retirement Daily shared “Maureen’s” story with Jeffery Nauta, CFA, CFP®, CAIA®, CDFA® and Principal at Henrickson Nauta Wealth Advisors. Here are her thoughts for “Maureen” and other women moving forward after divorce.
What advice would you give to other women currently facing the same challenges as this person to improve the outcome of their divorce (financial or otherwise)?
- It’s never too early to hire a financial advisor, even if you’re going through a divorce, preferably a CDFA® (Certified Divorce Financial Analyst). A knowledgeable advisor will help you with asset allocation, can discuss financial planning and tax strategies around divorce, and provide expertise in more complex balance sheet cases. Don’t rely on your lawyer or the judge to know about investments, financial planning and tax planning!
- Don’t make big purchases or big changes in the first year after divorce. Divorce can be traumatic and this first year is about recovery and should be about finding your financial footing.
- Don’t try to buy children’s love! She mentions that her ex-husband spent money on lavish gifts, but the kids appreciated his time more. We have seen this far too often and to the point that it has ruined individuals financially.
Do you have any advice for this woman that she could implement now given her result?
Make sure she gets all of her benefits. Does she have a dependent case FSA that can be used to pay for child care on a pre-tax basis?
What could this woman do to increase her income after the divorce, especially in retirement?
Remember that women tend to live longer than men and this requires more planning for a longer retirement. If she doesn’t already, consider deferring Social Security to age 70. Often you can find yourself in a lower tax bracket – be sure to fill in the lower brackets and consider Roth IRA conversions.
What is the area of advice you ALWAYS give to your divorced clients, regardless of their wealth?
Don’t make big purchases or big changes in the first year after divorce. Divorce can be traumatic and this first year is about recovery and should be about finding your financial footing.
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Learn more by watching our webinar, Round table on retirement: women, divorce and retirement, with Robert Powell and panelists Michelle Petrowski and Bonnie Sewell.
To find a financial professional with divorce experience, visit Divorce Financial Analysts Institute website.
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