A woman in her mid-fifties came in to see me about retirement planning. She had been divorced for five years and all she had left to her name was $200,000, sitting in cash.
Like most women, during the divorce settlement negotiations, she let emotions rule and turned down the retirement accounts because all she wanted was the house – the home they had raised their two daughters in for the last twenty years.
Since her divorce, she had lost the house and was living with a boyfriend (that she didn’t really want to stay with, but she couldn’t afford rent on her own). Plus there were medical bills to deal with because a past hip injury flared up. As a result, she had to start walking with a cane. To make things worse, she was unemployed.
My heart went out to her, but there was not much I could do for her. Had she come to see me before her divorce settlement, I could have steered her to make sound financial decisions, not emotionally-based decisions. (By the way, she reported that the ex-husband was doing just fine financially speaking.)
This article, What Women Must Know About Money and Divorce, is one of a two-part series on how women can avoid the financial pitfalls of divorce.
If you are a woman heading into divorce, here are my 5 tips to help you prepare:
Tip #1 – Think long term. Go for your share of the retirement accounts. Statistically speaking, women outlive men, which means you need your money to last longer.
Tip #2 – Don’t let emotions rule over intellect. Either let him have the house, or sell it and split the proceeds. In this economy, the house could be a liability, not an asset. You’ll essentially be starting over and the last thing you need is to be concerned with how to pay for the expenses associated with owning a home while also trying to save more for retirement.
Tip #3 – Protect your alimony payments. Be sure to put a term life insurance policy in place – with you as the beneficiary – for the full amount of alimony due to you. This way you’re covered if he suddenly passes before all alimony is paid to you.
Tip #4 – Remember long term care. Since women live longer than men, the odds are you will need long term care at some point in your life. Negotiate to have a long term care policy issued for your healthcare needs in retirement. There are plenty of options for funding it. For instance, it can be a lump sum premium policy that he pays for. Do your research and seek the help of a trusted insurance advisor or financial planner.
Tip #5 – Get support! Seek the counsel of trusted financial professionals: an accountant, attorney, insurance advisor and financial planner. Also seek emotional and spiritual support: a therapist, life coach and/or pastor. The bible says there is wisdom in the multitude of counselors. You deserve to be surrounded with people who will have your back. Divorce is one of the most difficult experiences you will ever go through. Don’t do it alone.
Going through a divorce is one of those times when you really need to stand up for yourself and advocate for your financial well being. Don’t let emotions get in the way of taking care of your needs. Don’t stick your head in the sand and go into denial.
Your soon-to-be ex-husband may try to bully you into settling for less, but don’t let that happen. I’ve seen too many women do this. Only to regret it later.
You’ve got to take a stand for your financial security. Your future self will thank you profusely for it.