This month the Rochester Business Journal debuted an article about women’s “Retirement at Risk” highlighting a local divorced woman. The article discussed qualitative and quantitative data around women’s finances particularly how divorced women are at a disadvantage when it comes time to retire.
While the data has merit, in my opinion, it is imperative to recognize that when it comes to divorce no one wins. In addition, rather than focusing on the outcomes why not be proactive and find a trusted advisor that can help during the transition. In response to the RBJ article, here’s my advice.
While not a topic most people may wish to discuss, divorce is a reality for an increasing number of Americans. The American Psychological Association states that between 40-50 percent of married couples in the United States divorce. While it can be an emotionally charged time for folks and their families, most divorce attorneys suggest thinking about how to divide your financial responsibilities as early as possible.
Here are some helpful tips:
- Get help as soon as you consider a separation. Meet with your financial advisor at the first hint of impending separation. A good financial advisor will be compassionate and willing to remain neutral if he or she serves both you and your soon-to-be-ex. Your advisor can revisit your investment portfolio and do a cash-flow analysis to illustrate what you might draw as future income. Your advisor can also offer advice about which shared debts might be best for you to take on (or avoid), given the amount of risk with which you are comfortable.
- Look at shared debt. With the help of a mediator and your financial advisor, you may be able to decide which of you will take which debts. You may consider paying off or closing any credit accounts before you divorce. Most states allow you to settle debt issues between you. If you can’t come to an agreement and the court has to decide for you, the divorce can get very complex and expensive.Another reason to be proactive about your shared debt: It can help you both maintain good credit ratings after your split and, perhaps most important, prevent uncomfortable conversations about unresolved debts with your ex-spouse in the future.
- What about the house? Research confirms most divorcing women want to keep the matrimonial home whenever possible, especially when children are still living at home. The spouse who keeps each home should also take responsibility for its loan, refinancing it in their name if at all possible.
- Information is important to handling debt well during a divorce. One situation where you might have to continue working together with your ex-spouse on a shared debt is if you have an unresolved tax obligation. You should talk to the IRS about setting up separate payments on that joint debt.
Overall, information is the most important key to handling debt well during a divorce. Collect tax returns, credit reports, and bank and brokerage statements as early as possible. The more you know about your marital finances, the easier it will be for you to negotiate over outstanding debts at the settlement table.
As the last word, work with your trusted financial advisor throughout the entire process in addition to your attorney or mediator. An advisor should help prepare you and strategize on how to map out how your financial future will look like after divorce.
This article was provided courtesy of Brighton Securities, a member of FINRA and SIPC, Caroline Hill, Financial Advisor and written in part by a third party.
WRITTEN BY CAROLINE HILL