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Financial planning and divorce

On Behalf of | Jun 21, 2018 | Divorce

One of the downsides of a divorce is the financial burdens it places on the parties involved. Besides the division of marital assets, the two incomes that previously supported one household must now support two. According to a study by the Center for Retirement Research, divorced parties in California and throughout the nation are roughly 30 percent less wealthy than non-divorced spouses.

This is especially true concerning retirement. Those who have divorced are generally less retirement ready than their non-divorced counterparts. But there is one exception to these findings. Single divorced women are as retirement ready as those who haven’t divorced.

Those studying the area of personal wealth management have not found a conclusive answer to this anomaly, but some believe retention of the marital home as an asset may play a role. If so, retention of the home after divorce contradicts the general advice of financial planners.

Many planners have recommended selling the home after a divorce to avoid the consequential expenses associated with homeownership. Many feel that those expenses, such as taxes and maintenance, would be better utilized in a retirement savings account, whether it is through increased 401(k) savings or an IRA. On the other hand, others recognize that appreciation of the home in a developing area, plus the equity building through monthly mortgage payment, also has wealth-building advantages.

For those going through a divorce, long-term financial goals should be considered as much as short-term goals. When discussing financial aspects of the divorce with a family law attorney, one should keep in mind that every case is unique. Most divorce attorneys will stress taking a long, reflective look at the client’s unique financial condition. The divorce process is often the best time to develop a long-term financial plan, one that extends years beyond leaving the courthouse.