We all know divorce is an emotional experience. Deciding who gets the house and how other assets are divided tops the list of questions in many divorces. Too often, though, at least one important step gets skipped: reevaluating the family’s financial goals.
“Most families start with one plan, but after a divorce there could be one for each spouse and even one for the children,” says Tony Austreng, a financial advisor with SunTrust Investment Management in Atlanta.
Your retirement plans are an integral part of your overall financial goals. You’ll put those plans at risk if you don’t take the right actions during a divorce. That’s because for most couples, retirement accounts and pension plans make up a considerable portion of their net worth, and splitting these assets can be complicated.
Here are three ways you can help make sure that your retirement plans stay on track.
1. Get advice
The very first thing you should do: Sit down with a financial planner to review your individual objectives, Austreng advises. Your retirement outlook will depend on how your retirement assets—401(k)s and IRAs—will be split. For instance, money contributed to retirement accounts during a marriage is typically considered marital property, but retirement savings accumulated before marriage will typically be considered that spouse’s personal property. With the help of your financial planner, you can establish a savings strategy that helps you better pursue long-term financial goals such as retirement.
2. Get your share of benefits
The prospect of divorce can be especially daunting if you were relying on a spouse’s pension plan to support your retirement goals. Reaching an agreement to receive a share of those benefits should be an important part of the divorce proceedings. And don’t forget about Social Security—if a couple is married for at least 10 years, a spouse is entitled to spousal benefits after a divorce.
3. Keep saving
You may have planned on travelling in retirement or even buying a second home. But without the benefit of sharing expenses with a spouse, your individual retirement costs may be higher than you initially estimated. “In most cases retirement after a divorce will require additional savings,” Austreng says. As you reassess your goals and adjust to life on your own, begin contributing as much as possible to your retirement accounts. You may have to adjust your expectations, but you can still plan for an enjoyable retirement by managing your spending and continuing to save.
While divorce is often a long and expensive process, Austreng cautions against dipping into your retirement savings to pay for it. “If couples can get together for their own benefit and sit down with a financial planner and attorney as they separate their finances, they can make sure their retirement goals remain intact,” he says.