Sometimes the passion of marriage begins to wane later in a relationship. Many couples over 50 are seeking a divorce from their long time partner and it’s leaving many people in tough situations emotionally and financially.
In fact, the divorce rate for those over the age of 50 has doubled since the 1990s. This may be thanks to the decreased stigma of divorce or the fact that many decide to separate after their children have graduated from college. No matter what the reason, there are several things to keep in mind financially when going through divorce after the age of 50.
Divorce Changes Your Retirement Plan
After spending 20 or 30 years together, your retirement fund from pensions and other accounts will hopefully have grown to a nice size as you prepare to enjoy retirement within the next decade.
Getting a divorce changes all of this. What was once a joint plan between you and your significant other now needs to be split up. The problem is, pensions are not easy to simply cut in half.
If it’s not done right, you could be losing out on hundreds of thousands of dollars in the long run.
This is why it’s important to keep your retirement in mind when getting a divorce after 50. You might have to cut back on a few things financially to make up for the change in income but there are actions you can make to help you have peace of mind for your future while pursuing a happier life.
Making Little Adjustments
There’s something I like to call the snowball effect. It’s a practice of making little adjustments which accrue as time goes on.
The little financial adjustments I help my clients make are always different because no situation is exactly the same but there is one thing I see come up time and time again: paying off debt after a divorce.
After the paper is signed and both parties go their separate ways, many times people want to start off with a completely blank slate and pay off all of their debt to the point where they have no liquid cash left for themselves.
This is a big mistake when you have lots of healthy debt. Making smart and small actions with low interest rates can actually make money in the long run.
Let’s say you have a car payment which is 6% every month and your retirement account earns 9% per month. It makes more sense to continue paying off the car payment at a regular rate and investing more into your retirement rather than paying off your car debt all at once. This way you’ve earned 3% over the time of your car payment with your retirement account.
Makes sense, right?
Don’t be hasty to start again with zero debt when you can make little adjustments to your regular financial habits and snowball them into healthy returns in the future.
Working with a Certified Divorce Financial Analyst
The longer a couple has been married, the more complicated their divorce is going to be financially. This is why it’s important for those going through a divorce after being together for 20 to 30 years to include a certified divorce financial analyst (CDFA) in the divorce process.
The role of the CDFA professional is to assist you and your attorney and/or mediator in understanding how the decisions you make today will impact your financial future.
With so much at stake from what you’ve built up over your life, you will want to make sure you talk to a professional to give you peace of mind your financial situation can thrive after the divorce and into your retirement.