Divorce is a common occurrence in the US, with 50% of all first marriages ending in divorce. According to the American Psychological Society, that is even higher for those marrying a second time. Marriages end for many reasons from infidelity, stress, personality changes, and financial. They are not only devastating to the children and extended family but devastating to your assets and ability to accumulate future assets. Divorce requires assets to be divided, attorneys to receive payments (on-going sometimes), and the divorcing couple soon finds themselves having to live on less to make ends meet. Studies find that the divorced spouses need more than a 30% increase in their income to maintain the same standard of living they had before divorcing.
The Cost Difference Between Uncontested and Contested Divorces
When emotions come into play, divorces often turn into battles to take assets, leaving a financial battle scar on the other spouse. Divorce doesn’t have to be this way. Uncontested divorces cost hundreds of dollars, whereas divorces taking months or even years can end up costing thousands of dollars- usually paid from the settlement of assets. The cost of ending a marriage, having to live on less, and decreased income (for those paying alimony or child support) from becoming a single-earner household, can make divorce almost as destructive to your retirement savings as the Great Recession was. Aside from the above reasons, retirement assets are usually divided to ‘equalize’ the retirement savings of each spouse.
When marriages are going well, couples participate together in financial planning, developing personal budgets, and savings and spending plans. The same should happen when anticipating a divorce, during divorce proceedings, and after the marriage ends. Financial advisors are in a position to discuss with both spouses (at the same meeting if amicable) the effects of fighting over assets, a plan to maintain retirement savings going forward, and keep the couple on track to retire as planned. If solutions can happen without fighting between attorneys, the couple stands to win by ‘playing nice,’ saving what they worked so hard to achieve before the marriage fell apart. The impending divorce now becomes ‘business,’ but understanding what you want and why can have positive financial outcomes for both parties.
Financial advisors can’t provide legal advice when it comes to divorce but can provide financial guidance regarding the liquidating of assets, effects on retirement accounts and future retirement savings, budgeting for a single-earner household, and other economic questions you may have. During this time joint investment accounts, personal investment accounts, and all financial records must be disclosed to the other party. Our Financial Advisory office will remain impartial as we view each client as vital while we continue advising both of you.