Going through a divorce can be difficult emotionally, and the financial aspects can be equally challenging. For people struggling to make alimony or child support payments, it can be easy to neglect their retirement accounts.
Regardless of your age, after a divorce, it is important to continue securing your finances for a time when you are not able or do not wish to work.
Assess your finances and create a budget
To plan for retirement post-divorce, you must first understand your current financial standing. Categorize your expenses and income, ensuring that your spending aligns with your post-divorce monetary goals. This budget will serve as your roadmap for managing finances during your retirement years.
Divide your retirement assets
If you and your former spouse had retirement accounts, such as 401(k)s or IRAs, during the marriage, you may need to divide these assets. Consult with a professional to determine how to split them in a way that is fair and beneficial to both parties.
Update beneficiary designations
Review and update your beneficiary designations on retirement accounts, life insurance policies and other financial instruments. Ensure they reflect your post-divorce wishes.
Understand Social Security benefits
If you were married for at least ten years, you may be eligible to claim Social Security benefits based on your former spouse’s earnings if he or she is at least 62 years old and remains unmarried. Knowing these options can help maximize your retirement income.
Plan for healthcare costs
One source indicates that a 65-year-old person in 2023 will spend $157,500 in medical care after retirement. Investigate your healthcare options and consider establishing a health savings account to cover medical expenses.
Reevaluate housing options
Your living situation may change after divorce. Assess your housing needs and expenses, whether that means downsizing, renting or owning a home. Ensure it aligns with your retirement budget.
Build an emergency fund
An emergency fund is necessary for unexpected expenses. Aim to have at least three to six months’ worth of living expenses saved in an accessible account.
Plan your estate
Draft or update your will, assign powers of attorney and establish trusts as needed. Ensure your estate plan reflects your post-divorce wishes and safeguards your assets.
Once you have a retirement plan in place, realize that you need to review and adjust it as necessary based on changes in laws, financial markets and your personal financial situation.