What I’m Telling My Clients About How to Plan for Retirement After Divorce
Divorce can be challenging and uncertain. Clients face emotional upheaval, new living situations, altered family dynamics, and potential co-parenting responsibilities. Financially, assets are divided, and support or alimony agreements are made.
The lower-earning spouse must evaluate what lifestyle they can afford or if they need to return to work, as in the case of a previously stay-at-home parent. Clients are often surprised by how much more costly it is to manage two separate households than one. This financial impact extends into retirement planning.
Key Takeaways
- Retirement plans may need to be reimagined after divorce, sooner rather than later.
- Clients are encouraged to grieve their past plans but then shift focus to their personal desires and goals.
- A realistic spending plan, exploring income opportunities, and planning for retirement savings are crucial conversation points with clients.
- Professional financial support is recommended, especially for those who may not have anyone else to discuss finances with.
Once my clients navigate through their divorce, they can begin focusing on their future, which typically includes retirement. My clients’ visions of “retirement” are as unique and varied as they are, but there are often common denominators. They usually want to feel like they are contributing and learning and have opportunities for growth.
Important
Studies show that for divorce among 50 and older, women experience a 45% decline in their standard of living (measured by an income-to-needs ratio), whereas men’s dropped by 21%.
Retirement after divorce can be particularly challenging. Clients may have held a specific idea of retirement with their former partner: activities they would do together, family trips, and companionship as they navigate aging. The upside of being newly single is that they don’t have to compromise on their plans before making decisions. The downside is that they’re facing this new chapter alone.
What I’m Telling My Clients
I give my clients space to talk about and grieve their old plans. Then, I encourage them to focus on their desires and goals.
We discuss the realities of solo aging: How can they intentionally build structures in their lives that can support them as they age? I suggest focusing on things that have been proven to improve quality of life, like relationships, community, friendships with people of all ages, and finding a sense of purpose. I remind them that this is all a work in progress and that they don’t need to figure everything out right now.
I also suggest creating a realistic spending plan, exploring opportunities to earn more income, and making a best guess on how much of the money received from the divorce can be allocated toward retirement savings.
The Bottom Line
Because money is still largely a taboo topic of conversation, I encourage people, especially those on their own, to find good professional support around finances. My single women clients often have no one to talk to about their money besides me.
For a newly single person, running the numbers on retirement is even more important. Of course, the future is uncertain, and my crystal ball is still on the fritz. We tell people all the time, “We’re making guesses, and that’s still valuable.” It’s good advice for everyone, but especially those who must be self-reliant.