I was recently quoted in an issue of Money Magazine on divorce and retirement. Though the full article isn’t online, I wanted to give you a peek at some of the key points readers who may be considering divorce — or already in the thick of it — can take away from it.
Sell the House
After divorce, household income will likely decrease (around 23% for men and nearly double that for women.)
Getting creative with your monthly expenses is key – by downsizing your home, taking $500 in savings each month and investing it with a 5% return over the next 10 years, you’ll have $77k in retirement savings.
Sell the house, save the money and stash it away where it will give you the biggest bang for your buck.
Focus on the Income
With property and assets in a divorce, there’s often more than meets the eye. I shared in the full article that a 401(k) valued at $500k (where 100% of withdrawals are taxed at ordinary income rates) is probably worth much less than $500k in a taxable investment account, where only the gains are taxed (at advantageous rates.)
Your best bet is to hire a financial professional to help you understand the today – and tomorrow – values of all the chips on the table, and determine the cost of your immediate and long-term needs. (I’m always available to provide advice on getting the most out of your divorce and retirement — send me a message and we can talk.)
Do the Division
Terms for your divorce have been established – but you still need to do the work before receiving these assets.
As the article reminds, dawdling can be dangerous. For example, a Qualified Domestic Relations Order (QDRO) will be necessary to divide retirement investments like a 401(k) or a pension, but not an IRA. Make sure you understand and follow up on the paperwork and processes required for you to receive assets awarded you.
It’s true: Divorce doesn’t have to spell disaster for your retirement. In fact, I offer several helpful hints for getting the most out of your divorce and retirement in this free, on-demand webinar. View the free webinar now!