If you are divorcing and anywhere near retirement, your financial future is a very important consideration for your divorce settlement. As I work with clients, I make it a priority to at least have a conversation on the subject with everyone 45 and older. The level of detail for this conversation increases the closer the client is to 65 or his/her desired retirement age. AND it must happen BEFORE the settlement is final.
Divorce can wreak havoc on your retirement assets (401K, IRA, pension, etc.). Additionally, some people find it tempting to pull some of that retirement money out, regardless of penalties, but that should be a last resort. A common outcome is that each party in the divorce gets 50% of retirement assets in the settlement. The problem is that retirement expenses of a single person are not merely 50% of what they are for a married person.
This is a great example of how a Certified Financial Planner (CFP) who is also a Certified Divorce Financial Analyst (CDFA) can add value and provide peace of mind. In my work for soon-to-be-divorced soon-to-be retirees, I generate a retirement projection based on the proposed settlement. I prefer to start before the settlement is even drafted to make sure my client asks for what is wanted and needed. The projection takes into account income from employment, support, social security, pensions (if you are lucky enough to have one), and any other income you anticipate as well as likely expenses and future goals. This allows us to work together to paint a picture for your future.
It is an amazing experience to work with divorcing couples who respectfully work together to make sure both parties will be OK; however, that is not a reality for everyone. Even if the divorce is not going well, it is a powerful process for the party I’m working with.
I have to say, I actually enjoy this part because it helps people to start planning for life after the divorce and maybe even do a little dreaming for their future lives. A little spark of positive energy to move forward with less uncertainty and more peace of mind.