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Divorce in Midlife: Considering the Implications

Grieving the loss of a marriage is grueling, no matter at what stage of life it occurs. But when the marriage has lasted twenty, thirty, or more years, this can be an especially harrowing passage.

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What issues should i consider before i retire?

Grieving the loss of a marriage is grueling, no matter at what stage of life it occurs. But when the marriage has lasted twenty, thirty, or more years, this can be an especially harrowing passage. Not only must the former spouses manage the emotional riptides that go along with the event, but the financial implications of fairly dividing the estate can seem overwhelming.

Despite the difficulties, however, both parties must carefully consider all the ramifications. And the current trend toward marriage dissolution between partners who are in their 40s, 50s, and 60s—often called “gray divorce”—means that more and more couples are bing forced to deal with these matters. The financial complications can be especially difficult for women; recent statistics indicate that in the year following a divorce, women’s income may fall as much as 23–40%.

But more and more people at this stage of life—both women and men—are making the choice to accept the difficulties that go with divorce. The decision to divorce after age 50 is occurring with increasing frequency; couples in this age group are more than twice as likely to divorce as they were in 1990. Not only that, but more women are making the reluctant decision to divorce. Research by AARP suggests that of women over age 40 who are divorced or divorcing, 66 percent say they initiated the proceedings.

For those who are in this situation, either by their own choice or that of their former partner, some key financial considerations must come into focus as soon as possible. Though the emotional tidal wave can make it hard to focus on such matters, four things require careful consideration, along with the assistance of qualified legal counsel.

Dividing investments and other property.

Each state has its own laws concerning the division of marital estates, but one foundational principle is that the marital property must be divided equitably and fairly (which may or may not mean it must be divided equally). People of this age have typically established careers, earned significant incomes, and made a number of investments of various types, and it is very important for both parties to remain as calm and strategically focused as possible while discussing the division of the estate. Each estate, of course, is different, and the nature of the property will dictate much of how the process evolves: divvying up stocks, bonds, and other marketable securities can be fairly straightforward, once the initial decision is made about what constitutes a fair distribution. But real property, stock options, and collectibles can be more difficult to divide. Dividing a business that has been co-owned by the spouses can raise a number of thorny questions, also. Having the right financial and legal team members is vital.

Selling or keeping the home.

This is an area where emotions can run especially high, especially when the couple has raised children and, often, even welcomed grandchildren into the marital residence. But the home is also a financial asset, and both parties need to view it this way. It rarely makes sense for one partner or the other, both now on a single income, to try and retain the marital residence. If the decision is made to sell, the first step is to obtain a fair appraisal with mutual agreement. When this is not possible, each party may wish to order an appraisal, and the two can be averaged to arrive at a mutually agreeable selling price.

Retirement accounts, pensions, and similar assets.

If both parties have established careers that include defined-benefit plans (pensions), 401Ks, IRAs, and other retirement plans, this may be much easier. But in many cases of “gray divorce,” the woman left the workforce in order to care for children or aging parents. In fact, the average woman will spend 12 years out of the workforce in order to perform such duties. In fact, even if she is currently working, she may have fallen behind in both earning power and accumulated assets for retirement because she has spent years out of the job market. In cases where a retirement account is to be divided, a qualified domestic relations order (QDRO) will be required. Getting a QDRO is typically neither quick nor inexpensive, so understanding how the costs of obtaining it will be distributed is key.

Adequate monthly income.

If both parties have established careers, assuring adequate monthly income may be less complicated. However, it is vital for both parties to set up a workable budget and to ensure that the projected monthly cash flow can sustain it. Sometimes, however, spousal support may be needed, and it is important for the affected party to work closely with their financial advisor, attorney, and possibly their CPA to arrive at an accurate, justifiable request.

The most important thing for anyone who is facing the transition of divorce is to ask the right questions and to have the right people on the team, both legal and financial. Divorce is one of the most stressful and challenging of life’s events, but when both partners focus on positive outcomes, getting on with life after divorce can be much smoother and less emotionally stressful.

At Milestone Money, we understand that difficult life transitions have profound financial implications, as well. As a fiduciary financial advisor, we work with our clients to learn as much as we can about each specific situation. This allows us to help create a plan that matches each client’s needs. Perhaps the best way to constructively manage the difficult passages of divorce is to have a plan in place. If you or someone you care about is facing this or some other challenging circumstance, please get in touch with us; we want to help.

 

 

 

What issues should i consider before i retire?

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Life is full of financial milestones. We pay for college, we get married, we start businesses. But the most important financial decision we will ever make is when and how to retire. Milestone Money helps you map success to and through retirement.

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