Focus on the Future
Focus on the Future — Keep your Retirement Goals on Track Through a Divorce
Consulting an attorney with experience in finance will be necessary to help you make appropriate decisions. Look for one who is a Certified Divorce Financial Analyst. To assist in your meeting with an attorney and to help ensure your financial wellbeing, follow the advice of the old adage, “knowledge is power.”
Once divorced, establishing or reestablishing your personal credit history should become a top priority.
Collect all financial and retirement documents, such as:
- Bank and brokerage accounts
- Credit card statements
- Mutual funds and annuities
- Payroll stubs (yours and your spouses)
- Recent federal and state tax returns
- Life insurance policies
- Retirement plans (IRAs, pensions, 401(k), 403(b) and 457 plans) from current and former jobs.
Collecting all of this information will help you and your attorney to create a comprehensive financial picture in order to help you make decisions for your future.
Focus on your future
A recent study by the ING Research Institute found that the average divorced person had $10,000 less in retirement savings than the average married person even though divorced respondents were typically five years older.* You can help avoid this shortfall by making retirement savings a key part of asset negotiation.
Qualified retirement plans, which include a 403(b), 457, 401(k) or profit-sharing plan can be divided using what's called a qualified domestic relations order (QDRO). If you are not participating in a retirement plan, but your spouse is, you may be able to receive a portion of any assets in your spouse’s plan. It’s best to use a skilled attorney to ensure you understand the rules and the process.
If your spouse had a 401(k) and you receive a distribution, you may be able to roll those assets into an individual retirement account (IRA). Converting to an IRA may provide you with more choices of investment options and more control over your money.
Make sure to understand if you are eligible for any spousal Social Security benefits. If you’ve been married for over 10 years, you may be entitled to half of your former spouse’s Social Security benefits. But, there are exceptions, so make sure you learn what they are.
Focus on your credit
Once divorced, establishing or reestablishing your personal credit history should become a top priority. Open a savings account and if you don’t have a credit card in your name, get one. Creating a track record of personal savings is important especially if you want to rent or buy a future home, apply for loans or get a job.
Avoid the tempting pitfalls
Before considering whether to use a retirement plan distribution as a source of cash, make sure you understand the cost and tax ramifications. Taking an early withdrawal from a retirement account can cost you both now and later in retirement.
Whether you’ve played an active role in managing the household finances or not, it’s not too late to become more informed, especially as you embark on a new chapter in your life.
ING U.S. does not offer tax advice or legal advice. Please consult with your own legal counsel and tax advisor concerning your personal situation before making financial-related decisions.
*ING Research Institute’s “Marital Status, Money, and Retirement” Study, February, 2013.