Over 50% of all marriages end in divorce. Additionally, married couples who argue about money once a week are over 30% likely to get divorced.
However, most people only think about divorce within the context of social and financial disruption for young and middle-age people.
The average retiree is 66 years old and over half of all retirees have absolutely no money or retirement fund to speak of.
So, that means that the other half of retirees, people with significant retirement funds, assets, property, and monies, should think about the consequences of divorce on their lifestyles.
A retirement fund is basically a budget designed to last you throughout the entirety of retirement, from the age of 65 until death.
Most retirement funds are calculated to include annual cost of living expenses, rent, food, and so on.
Such calculations can be catastrophically disrupted in the event of divorce before or during retirement.
Especially if such calculations were done in consideration of a retire couple.
No matter what age you are, you need to protect your retirement future. Divorce is very common, and while uncomfortable, you need to face how divorce could disrupt your retirement plans.
Pre-Divorce Planning
Whether you’re a married couple in your 30s or 60s, you may want to do conduct some amicable pre-planning to divide retirement assets in the event of divorce.
This may be hard to do, since it may feel negative or like you’re questioning the viability of your relationship.
However, when we buy life insurance, it’s not for the sake of angering the Specter of Death and trying to get it to take more notice of us.
None of us are going to live for forever. And in that same sense, some relationships are just not bound to last forever.
Think about it. You and your spouse may plan for and apply for life insurance, home insurance, car insurance, health insurance, and so on.
So, it’s only practical to plan out how both parties would protect their mutual interests when it comes to retirement funds.
Also, it’s more practical to engage in such planning while both parties are amicable and open to communication. Unlike say, when couples are in the midst of planning for a contentious divorce.
Legal Decree for Post-Divorce and Pre-Retirement Planning
A decree is basically a statement about the division of assets, property, and monies, like your retirement fund, in the event of divorce.
You will basically list everything that will be divided in the event of divorce. This is almost like a pre-nuptial agreement for divorce.
What you must always keep in mind is that retirement is a basically budget plan and allocation of finances designed to support you in post-work life.
This includes your Social Security benefits (more on that later), your 401 (k), life insurance policy, health insurance policy, pension plan, and so on.
The only problem with a legal decree is that it might be legally binding depending on where you live.
So, if you have one drawn up, make sure that you have it notarized and prepared under direct professional legal guidance.
Don’t prepare a decree under the tenets of the honor system with your spouse. Get a lawyer involved. Your retirement fund could depend on it.
Pensions, IRA and 401 (k) Plans
No one enters marriage with the intention of getting divorced. Still, almost half of all marriages end in divorce. It’s a common statistic that no one can forget.
However, most people might forget that they listed their ex-spouse, or soon-to-be ex-spouse, as the primary beneficiary on their work-sponsored retirement, IRA, or 401 (k) plans.
They forget until they are of retirement age and are about to get divorced. This can be a financially dangerous thing to do when your retirement could be at stake in a divorce.
Work-sponsored retirement accounts can sometimes be the most financially lucrative assets that a working-class or middle-class couple own.
Consider that retirement accounts, IRA, and 401 (k) accounts can’t be legally accessed by creditors.
These are legally protected assets which can lose legal protection once you get divorced. This can be a crippling prospect to deal with if you’re nearing retirement age.
So, it’s important that you reassess such paperwork once or twice a year and change beneficiary designees as necessary.
You’re Ex-Spouse Can Still Receive Your S.S. Benefits if They’re Single and You Remarry
Yes, you read that right. I am not making this up. This information comes straight from the official website for the Social Security Administration.
If you’re 62 or over, divorced, and were married for at least 10 years, and remarried while your former spouse is single, then your former spouse can still be recognized as a beneficiary on your S.S. record.
Incredibly, even under these circumstances, your former spouse will be entitled to disability benefits and Social Security retirement benefits as a de facto spouse beneficiary from your account.
If your former spouse remarries, but that marriage ends by annulment, divorce, or death, then they still automatically become eligible to receive Social Security benefits under your account.
Under this scenario, once ex-spouse must be married while one is single for such contingencies to kick in.
This is very complicated and bureaucratically nebulous topic. While we should always enter marriage with optimistic intentions, you should consult a S.S. official about this potentiality.
You should definitely consult a S.S. official or lawyer at the first signs of divorce and not wait to think about it years after the fact
Homes, Home Equity, and Reverse Mortgages
The average market of a new and well-maintained home is about $362,000.
Owning a valuable home, appreciable home equity, and reverse mortgages may not be considered valuable retirement assets to most people.
Such opinions change drastically when a retiree is confronted with an impending divorce.
Divorce proceedings can involve acrimonious bickering over who will keep the home, how to spilt equity, what to do about reverse mortgages, and so on.
Consult a lawyer about determining how to spilt up such assets in the event of divorce during retirement.
Talk to Your Lawyer
Recalculate your retirement budgets to account for the need of a couple and a divorced couple.
Consult a lawyer and amicable plan such contingencies with your spouse.
This is not about planning for the worst.
Its about planning for an eventuality.
A 50/50 eventuality.
Read More
HERE’S HOW TO REMOVE RELATIVES FROM YOUR WILL
I WAS FINANCIALLY ILLITERATE AND TOO YOUNG WHEN I GOT MARRIED
WHY COUPLES SHOULD MAINTAIN SEPARATE BANK ACCOUNTS
Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.