Am I Going to be OK? Divorce and Retirement

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.

Divorce and your Bank Accounts

California is a community property state, meaning that the name on a bank account does not define who the money belongs to. Income and debt incurred during the marriage belong to both parties. This changes at the date of separation.

A couple’s relationship during the divorce process ranges from congenial and respectful to highly contentious. The ability of the couple to work together often mirrors how they handle their accounts, both joint and separate. Some couples continue to share a joint bank account throughout the divorce process, others end up in court to ensure one of the parties has access to money to cover basic living expenses.

Couples who are using a process that makes decisions outside the courts, such as mediation or collaboration, have a great deal of flexibility on the terms of their settlement agreements. These more congenial couples will frequently pick a date and then divide their cash accounts 50/50. As a CDFA, I advise people to make sure they have access to some cash during the divorce and as part of the settlement agreement as an emergency fund.

The stickiest situations I have seen occur when one party hides money or moves money around before the divorce, making it difficult to properly identify all of the community and separate assets. California mandates financial disclosure, so money hide-and-seek is illegal and can result in significant consequences in court.

A spouse who does not have an individual bank account can open a checking or savings account, but it may be difficult to get a credit card. While I do not encourage accumulation of credit card debt, it can be difficult to manage day to day living without a credit card. So, if you don’t have one, get one!

No matter what your relationship, the size of your bank account, or your employment status you will need money to live on and pay legal expenses during the separation period.  Working out the financial details to divide your money doesn’t happen overnight, so make sure you have some cash available to cover expenses.  If you and your soon to be ex-spouse cannot work it out amongst yourselves use an attorney or divorce financial planner to help you.

Alphabet Soup of Getting Professional Help with Your Divorce Finances

Getting good financial advice as part of your divorce process can be one of the most important decisions you make. During this highly emotional time you are making some of the most important financial decisions of your life. High emotions and important financial decisions, a good match??? Not usually.

So who do I trust? It depends, but a simple answer is a professional trained in both divorce and finances relating to divorce. Your attorney should be smart, but is probably not the best professional to consult about what your retirement picture will look like after your divorce is completed.

Certified Public Accountants (CPA) or Enrolled Agents (EA) are great resources for tax related questions and advice, many are also well versed in divorce. Some tax professionals are also Certified Divorce Financial Analysts (CDFA) and specialize in divorce finances and taxes. Others may be Chartered Business Valuators (CBV) or Certified Valuation Analysts (CVA) who specializes in business valuations, or Certified Fraud Examiner (CFE) trained to look for hidden assets, financial manipulation, or misconduct.

A Certified Financial Planner (CFP) has specialized training in financial well-being, budgeting, and planning for your future life. A CFP with a Certified Divorce Financial Analyst (CDFA) credential specializes in financial well-being before, during, and after divorce. As a CFP and CDFA, I admit I am a little biased about the skills someone like me can bring to the table, but I honestly believe consulting with someone like me can be of tremendous assistance making wise decisions during your divorce such as:

  • Should I keep the house? (Notice not CAN I keep the house)
  • Will my support be enough to meet my monthly expenses? How will I afford to pay support?
  • What is the impact of divorce on my retirement plan? What is a QDRO? Do I need one?
  • What about paying for the children’s college education?
  • What about health insurance?
  • What protections do I need in terms of insurance and estate planning after divorce?
  • I’m divorced, now what do I need to do with my finances?
  • Are my investments set-up to meet my retirement needs?

CFP credentials require a certificate covering a wide range of financial education topics, experience, and successful completion of a very challenging exam. A CFP with CDFA credentials has earned an additional credential to specialize in divorce finances.

Rest assured, just like any true professional, a CFP, CDFA will not try to be all things to all people. As needed and appropriate, I (and my colleagues too) refer clients to other experts in the Alphabet Soup of financial professionals when their expertise is more appropriate for your  divorce situation.

Dogs, Marriage, Exploitation of Seniors , & Medical Directives – 2014 Celebrity Estate Planning Lessons

While most of us don’t have multi-million dollar fortunes there are some good lessons to be learned from celebrity estate outcomes. Somehow it is much more interesting to learn from Robin Williams, Casey Kasem, Phillip Seymour Hoffman, Lauren Bacall, Joan Rivers, and Mickey Rooney than read just another article on estate and end of life planning. The current estate tax exemption now $5,340,000 makes planning easier for most of us, but there are still important questions to keep in mind. And by the way, an “estate” doesn’t have to be $1M to be messy. Far too often family relationships become stressed in the settlement process, and sadly some never recover. Not the intended outcome!

  • Who will make end of life decision? Do they know what you want?
  • If you have had multiple marriages or haven’t married a partner, is it all up-to-date? Things can get very messy.
  • Have your marital status changes since your estate plan was put together?
  • How much “sudden” money will recipients under 30 yrs. be receiving? Are they prepared to handle it responsibly? Can you add some type of stipulation to delay or split the timing of receipt?
  • Have you talked to your family about your wishes? A little conversation goes a very long way.
  • And some mentions of care for your pet(s) is a good idea as well.

Check out this link to access the 2014 estate planning lessons from celebrities article.

Cheers Beth

How’s Your Financial Satisfaction?

In our society we tend to equate financial satisfaction with having a lot of money.  In actuality, the degree to which one feels satisfied with their money is based on a unique and personal interpretation of your needs and circumstances. In other words, two individuals can experience identical financial situations, and yet the degree of satisfaction they feel can be at polar opposites.

Satisfaction describes a feeling of fulfillment or contentment.  Its meaning is relative and often dependent on one’s definition of success as applied to specific areas of life.  In our financial lives, “satisfaction” is as much (if not more) an emotional issue as a practical one.  That is because a sense of satisfaction is highly subjective, and greatly influenced by the individual’s attitudes and beliefs.

The first step to making positive change in any area of life is awareness. Download this satisfaction survey to start the process!

Financial Satisfaction Survey_Lamorinda

And check out my new web site while you are here…


The Financial Satisfaction Survey is available via licensing arrangements with MoneyQuotient and is protected by federal copyright law.

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