One in four divorces involves couples over the age of 50. In addition to the emotional turmoil caused by being divorced after 50, a late-in-life divorce also causes a tremendous upheaval in retirement plans. What can you do to ensure your golden years are still secure even though you find yourself in unfamiliar territory?
Negotiate for retirement accounts in the divorce settlement
Seek to negotiate to retain the retirement accounts. These funds have been saved over many years and maybe decades. Not only have the funds you have invested grown through compounding, but they have done so tax deferred. Rarely do other investment vehicles or assets offer so much immediate capital, including the equity in your house.
If it comes down to one or the other when being faced with divorce after 50, offer to sell the home and split the proceeds. The retirement accounts offer a better potential long term return and more liquidity.
What to do if the divorce is final and it’s too late to negotiate
While this is not the most optimal situation, it’s not completely hopeless either. Start by setting a realistic retirement goal. What standard of living do you want to maintain in retirement? Are you planning on relocating to a less expensive area after you retire? Do you want to travel to Europe? Or maybe see the grandkids more often? When getting divorced after 50, define your retirement goals, then create a plan to reach them.
Maximize your retirement savings
This can be done in one of two ways. If you’re still employed, either increase your 401(k) contributions to take full advantage of your employer match or contribute the full amount each year to your IRA. You may be able to contribute to both your IRA and your 401(k).
Contact your accountant and financial adviser to discuss the most effective way to contribute to one or both vehicles.
Simplify your investment strategy
These are not funds you want to gamble with. Depending on your risk tolerance, pick a more straightforward investing approach for these funds and stay the course. Don’t be lured into chasing yesterday’s winners based on daily fluctuations in the market. Decide in advance how often you’ll review your account and stick with it. You may decide this needs to be done once a quarter. Then, at the beginning of each quarter review the investments you have selected.
If you’re happy with the role an investment plays in your overall portfolio, leave things as they are. If you believe another fund could do better, consider switching investments. However, don’t make this decision lightly. Remember, each fund in your retirement account charges ongoing management fees, and some even charge a sales commission up-front or when you sell. The more you shift money around to different funds, the more you eat away at your savings. That’s not to say you should stay married to a bad investment, but you shouldn’t flip funds each month either.
If you’ve gone through being divorced after 50, you may think your financial future is bleak. But you can make certain decisions and take steps to find and stay on the path to a confident and comfortable retirement.
What’s your biggest anxiety around money and divorce?
Russ is a Certified Divorce Financial Analyst and fee-only financial advisor based in Atlanta, GA, and has provided personal financial advice to individuals and families for 20 years. His focus is on serving women, especially widows and divorcees. You can learn more about Russ and the work he does by visiting WealthcareForWomen.com. Find him also on Twitter, LinkedIn, and Google+.