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Divorce isn’t just tough emotionally; it can wreck a solid financial plan. It’s important to understand the cost of divorce before everything’s final so that you may restore your financial life and still achieve your goals. If you’re younger than 50, there are a few important considerations when restructuring your financial life.
Life after divorce includes taking a fresh look at your finances – and perhaps closing the door on your old way of managing money. What’s on the top of your list? How about these quick tips:
Look ahead to your life after the divorce and answer a few questions about what your post-divorce life will look like.
Take stock of your situation. Do you need to get a job to protect yourself in case your ex-spouse has trouble making payments, or if your divorce agreement sets a date for when the payments will end? Even if you will receive alimony and/or child support,you should consider a life insurance policy on your ex-spouse. If they died, depending on what assets might revert to you, your income could stop as well.
On the other hand, if you are the one making alimony or child support payments, you have another set of questions to answer.
It will be important to keep track of your payment deadlines andbe aware of situations where you can reduce or stop payments. For example, child support typically ends when the children reach a specific age.
Keeping track of money can be hard during the best of times. It will likely be even harder in the stressful days after your divorce. By taking charge of your household budget, you may be able to avoid incurring additional debt. Make a list of all the expenses for your post-divorce household. See how this expected spending matches your income. Does it look like you can keep the same lifestyle or are you going to need to scale back in some categories?
How are you saving for retirement while you are still married? If you are using your spouse’s work retirement plan, you won’t be able to use this account after the divorce. A financial advisor will have many options for you. One possible suggestion would be to set up your own Individual Retirement Account (IRA). These accounts offer several tax benefits and aren’t connected to work; you could set one up on your own.
If your divorce agreement will divide your shared retirement assets, you might want to consider requesting a Qualified Domestic Relations Order (QDRO) as part of the settlement. This document can allow you to transfer money out of your spouse’s retirement account into your own retirement plan without tax consequences.
These are just a few important considerations for rebuilding your new personal financial plan after a divorce. And we know the task can seem overwhelming. Start small. Take stock of your situation. And then find a trusted financial advisor or lawyer to help you tackle the rest. Think of this process as a way to help you gain a fresh start on your finances and your new life after divorce.
This article is for information and educational purposes only; does not necessarily represent the opinion of Protective Life; and, is not intended to serve as financial planning for getting divorced but, instead, to supplement other information specific to your situation. Neither Protective Life nor its representatives offer legal or tax advice. Purchasers should consult with their legal or tax adviser regarding their individual situations before making any tax-related decisions. For information about Protective Life and its products and services, visit www.protective.com.