Boomers: Protect finances during divorce
Divorcing a spouse is an emotional process at any age. However, the financial aspects of divorce can be even more complex for boomers who are nearing retirement. Older adults are typically in the prime of growing their nest eggs, making key decisions about health and long-term care insurance, and organizing their retirement finances. Going through a divorce during this delicate time can make it more challenging for these individuals to adequately plan for their futures.
Studies show that the divorce rate in the United States still hovers around 50 percent, and one in four couples who divorced in 2009 belonged to the baby boomer generation, according to Fox Business. With separate studies revealing that retirement planning in the U.S. is already inadequate, it’s crucial that divorcing adults protect their assets during the process.
First, adults should cut back as much as possible on spending while divorce proceedings are still ongoing. The legal process is expensive, and boomers may save thousands simply by talking out their problems with a mediator as much as possible. However, it’s still important that couples come up with a money management plan that focuses on downsizing their current living expenses.
Second, couples should reach an agreement on how to handle their joint accounts. If boomers have credit cards in both names, they should reach an agreement on who will pay off the balance before closing the card.
This is an important step for adults in safeguarding their respective credit scores and being eligible for new credit lines post-divorce. If one spouse who is responsible for paying the balance falls behind or fails to pay, both individuals will see their credit decline.
When it comes to dividing property and retirement assets, it can be helpful for couples to speak with financial professionals, including advisers, housing counselors and tax preparers. This is because the assets they retain will have an impact on their long-term finances and taxes, and consumers should be aware of the consequences of maintaining ownership. For example, one spouse may be entitled to the home, but it’s important to make sure they can afford the payments, property insurance and upkeep. In other cases, couples may initially want to split a retirement asset, but find that it makes more financial sense to accept a trade-off. Because the process can be complicated, consulting industry professionals can make it go more smoothly for all parties involved.