While a reasonable and immediate goal for you to hold in the middle of your divorce is simply for the divorce to be over with, this goal will not suffice when it comes to your need to plan long term for your future. If you want to pay for your child’s college education how can you meet that goal in light of the changes in your life that the divorce has brought on? What about retirement? Did you give up a sizeable chunk of your 401(k)? Does it even make sense for you to invest your money when you have so many immediate needs that need to be addressed in your life?
Today’s blog post from the Law Office of Bryan Fagan, PLLC will address your long term financial goals as seen in the time period immediately following your divorce. You made it through your divorce and now you have the luxury of being able to look down the road a ways. What do you want to accomplish and how are you going to accomplish the goals that you do have? Fortunately for you, the lion’s share of the effort needed to achieve those goals rests on your shoulders.
The shared goals of your marriage need to become your personal goals after a divorce
Having a shared goal means not only that you are able to combine your efforts to achieve that goal with another person, but that you also have a built in accountability partner. If instead of putting the usual monthly contribution in a certain month into your retirement account you wanted to buy a new tool or dress or (fill in the blank here), your spouse could intercede and reason with you to stay true to your goals.
The shared goals that you possessed with your spouse do not need to vanish after your divorce. In fact, it is for the best that they do not. You need to remain goal oriented in your post divorce life even if your finances are a little tighter as a result. Remember that budgeting and restraint are going to need to be a part of your life in the years following your divorce. Your new life as a single person will allow you to reevaluate your prior goals and accomplish them on your own terms.
Fit your financial goals within your new life
Figure out a way to get your money managed correctly based on the realities that life as a single person causes you to encounter. What made sense for you as a married person may not make sense for you any longer. If this sounds like I am telling you that you may need to change your habits and perspectives it is because I am. This isn’t a bad thing, but it may be a shock to your system if you are a creature of habit.
Consider your investments based on your age, your tolerance for risk and whatever tax implications are the result of those factors. If you need to ramp up saving for a child’s college savings you may necessarily need to take a step back from investing as aggressively as you may like for retirement.
Additional responsibilities are not a bad thing. You can take more control of your life and your finances. These are great skills to develop early on in your life as a single person. The responsibilities will not feel nearly as onerous if you plan ahead and budget for them as we have been discussing this week. How will you react to these challenges?
The typical life path of a divorced person’s finances
Let’s approach a timeline that many divorced people look at in their post-divorce life. First of all your retirement assets have likely been divided in a divorce. You may have left the marriage with a gain in terms of your retirement savings, or there may have been an outflow to your spouse that resulted in you keeping less than you may have liked as far as your retirement savings are concerned.
Next, as a single person you will need to consider the costs of retirement. What will it take for you to live comfortably as a retired person? How long into the future do you plan on working. What can change about your planning if you were to remarry? These are all viable questions that need to be asked.
Once these questions are answered you can create your own retirement savings vehicle if the need is there. You may have a work funded 401(k) that you can continue to invest into. There are other options like IRAs that allow you to contribute a certain sum of money each year- either deferring the paying of taxes until retirement age or paying them up front and not having to pay taxes on the back end.
Next- do you have kids? How will their college be paid for, if so? Contributing to a college savings plan is something that many parents do from the time that their children are very young. If you were not in a position to do this, fear not. You can make up for lost time (to a certain extent) by investing more money now into a college savings account. Do what you can and then work with your ex-spouse to pay cash as much as possible for college expenses that you were not able to save for.
A lesser known financial issue that is becoming more common is the costs of long term care- either in a nursing home environment or from maintaining a health care worker to care for you in your home. If you are concerned about the costs of paying for health care related expenditures in your golden years you may want to begin to price long term care insurance. I have seen adults once they reach sixty make the decision to purchase a policy that will ensure that their long term care is paid for. Any older and the cost of the policy begins to outweigh its benefit to you.
If you consider these issues in full then you should be in a strong position to retire when you see fit. That doesn’t mean that you couldn’t use a bit more money in your IRA, but it does mean that you can live a respectable life- one that befits a person that worked hard, saved money and did right by their children.
A word (or more) on gray divorce
If you find yourself a person in your fifties (or older) getting a divorce then you should know that you are not alone. An increasing amount of people in their retirement years (or near retirement years) are choosing to divorce their spouse. These are known as gray divorces. Be aware that there may be specific challenges that you face in your divorce that younger persons may not need to be as concerned about.
Consider whether or not you and your spouse have saved sufficiently so that you both are able to retire relatively young with the ability to live comfortably. If not, you may struggle to build a portfolio of assets that can sustain you into retirement age. Long term care insurance may become more of a necessity as a result.
Hiring an attorney with experience in handling gray divorces is essential to your being able to live a respectable post divorce life. How your marital assets are divided is critical when you are not flush with retirement savings. Take the time to interview attorneys to learn about their experience levels in handling divorces for people your age.
Questions about divorce, finances and anything in between? Contact the Law Office of Bryan Fagan, PLLC
If you have read through our material today and have questions about it please do not hesitate to contact the Law Office of Bryan Fagan, PLLC. Likewise- if you have questions on any other subject in Texas family law please give us a call today.
We offer free of charge consultations six days a week with a licensed family law attorney. It is always a pleasure to sit knee to knee with people in our community (like yourself) and to discuss their problems in a confidential and hassle free environment. Thank you for showing an interest in today’s topic and we hope you return to read more tomorrow.