By Thomas Rindahl, CFP
I met with a new prospective client the other day. He was hunting for an advisor. We sat down and had a great conversation on finances and my financial planning philosophy. He indicated that he would be back with his wife at a later time, but wanted to get some general questions answered first.
He was considering retirement and wanted to get a rough idea of whether it was feasible. He disclosed all of the pertinent information about his situation. Doing some rough calculations, things seemed pretty positive. But then he unloaded the bombshell, “Would my retirement be affected if I get a divorce?”
Of course, it's going to be affected!
Sadly, this is a common issue. Roughly half of all marriages end in divorce. The numbers are even higher if it is a second or third marriage. It is an unfortunate part of life but sometimes the relationship just does not work out. And unlike jumping into a relationship, unwinding one can be complicated.
With divorce, we have to take into consideration any number of concerns. Splitting up the retirement accounts. Splitting the pension. Will additional life insurance be required? Who gets the house? Is there alimony to pay? Is there child support to pay? What is the cost of running a household on a reduced income? Which property is going to whom and what kind of value will be placed on it? Division of debt. Who gets the goldfish? Etc., etc., etc.
Yes, divorce will, to say the least, “affect a retirement.” It will complicate it.
Now let’s also consider that divorce is more likely to financially hurt women. Their standard of living may be significantly decreased. For a majority of them, they need to apply for welfare benefits. There is a reduction in household income (if not complete loss of the income), potential damage to the credit report, and loss of assets. After divorce, new considerations will need to be placed on revising monthly budgets, retirement planning, estate planning and tax planning. And considering that finances are a major contributor cited for divorce, it is even more critical that women are part of their family’s financial planning process from the very beginning.
Divorce is difficult and certainly not a decision to be made lightly. It can have lasting impacts on both parties. It is best to seek a team of advisors to help you navigate your financial life after divorce.
About the author: Thomas Rindahl
Thomas Rindahl, PhD, MBA, CLU®, ChFC®, CFP®, LUTCF, BFATM, is a financial advisor in Tempe, AZ. Through comprehensive and holistic financial planning, he has helped his clients to navigate the twists and turns of life for over 20 years.
Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through PFG Advisors. TruWest Wealth Management Services, TruWest® Credit Union, Securities America, and PFG Advisors are separate entities. Securities, insurance, and advisory offered through Securities America, PFG Advisors or their affiliates are: Not NCUA insured. No credit union guarantee. Not credit union deposits or obligations. May lose value.