08-10-23 D

Financial Planning for Women Going Through Divorce: Empowering Your Financial Future

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Whether a woman is a full-time working professional, works part-time, or is a devoted homemaker, the circumstances surrounding her divorce are as unique as she is. But one common thread that connects women going through a divorce is the need to create a secure financial future. We explore essential financial planning considerations for women going through a divorce and examine how a woman’s employment status can impact these considerations.

Essential Financial Planning Considerations 

Assess Your Financial Situation

The first step in proactively handling a divorce is clearly understanding your financial situation. Compile all financial documents, including bank statements, investment accounts, debts, property records, and tax returns. This step becomes even more critical if there are children. “Mothers often take the brunt of the financial hit [in divorce] because of both the expense of raising children and the negative consequences for their earnings of having childcare and family responsibilities.”1 Asset division, including retirement plan assets, can be significant for homemakers with fewer assets in their name. Regardless of income level, women going through divorce need to become familiar with the laws in their state and be proactive in protecting their rights to a fair share of marital assets.

Establish Clear Financial Goals

Divorce can be overwhelming, but setting clear and realistic financial goals can help maintain focus. Start by identifying short-term objectives, such as covering living expenses, and long-term goals, like saving for retirement or children’s education. Setting realistic goals that reflect new circumstances following divorce is essential.

Budget Wisely

Creating a budget is critical to managing post-divorce finances effectively. It is essential to evaluate all expense items and ensure that the budget aligns with a new post-divorce financial reality, including income and support that will be received (or must be paid). If there are children, child support and alimony may play a significant role in budgeting. “The majority of women in the United States remain the primary child caregivers following divorce and often are the principal financial contributors for their children. Caregiving can impede the wife’s ability to earn, while the presence of children increases the household’s costs. These factors together make it difficult for the wife to save.”2 For homemakers who may not have a regular income of their own (or one that is significantly lower income than their spouse), it is crucial to create a budget based on the new financial situation. Child support and custody arrangements become essential considerations for financial planning. 

Protect Your Credit

While changing marital status doesn’t impact credit, the changes to personal finances that often come with divorce can have an impact.3 Credit may be affected during and after divorce because household income is affected, normal bill-paying may be disrupted, and finances and debt may be unclear. Taking proactive steps to keep credit on track include monitoring credit regularly and addressing any discrepancies promptly. To protect credit during divorce, consider closing joint accounts or refinancing shared debts to separate financial responsibilities.

Understand Employee Benefits

Take the time to understand employer-provided benefits, such as health insurance, retirement plans, or stock options, and their implications during and after the divorce. Some benefits may require adjustments or updates to reflect the new marital status and financial situation. Homemakers who are not employed also need to consider health insurance coverage post-divorce. Options include continuing coverage as part of the divorce settlement, COBRA, and individual health plans to fill the gap.4 

Plan For Retirement

“The Retirement Confidence Survey revealed that 76% of married women voiced being very or somewhat confident they will have enough money to live comfortably throughout their retirement years. Yet only 43% of divorced women feel the same.”4 Dividing retirement accounts can be a complicated process during a divorce, and it is imperative to understand rights concerning retirement accounts and pension plans.  

Update Estate Planning

Updating an estate plan is crucial after a divorce. Action items include reviewing and updating beneficiaries on life insurance policies, retirement accounts, and other financial assets. Estate planning documents, such as wills and trusts, should reflect post-divorce circumstances and wishes.

Special Considerations For Primary Wage Earners

As a primary earner, you already have financial independence. However, you need to take the time to identify your short-term and long-term objectives, considering factors such as asset preservation, maintaining your lifestyle, funding your children’s education, and planning for retirement. It is crucial to have a comprehensive understanding of your financial picture, including real estate, investment accounts, retirement funds, business interests, and any outstanding debts or liabilities. This knowledge will enable you to make informed decisions about asset division and financial settlements.

By being proactive and strategic, you can protect your wealth, maintain financial stability, and secure your future. Seek the assistance of experienced professionals such as a divorce attorney specializing in high-net-worth cases, an experienced financial planner, and a tax advisor. They can help guide you through complexities unique to affluent, professional women. Their expertise will protect your interests and help you achieve the best possible financial outcome during a divorce.

  • Divorce can have significant tax implications, particularly for high-net-worth individuals. Engage your tax advisor to assess the tax consequences of asset division, alimony, and child support. With their guidance, you can implement tax-efficient strategies that optimize your financial position during and after the divorce.
  • As an affluent professional woman, you likely have a diverse portfolio of assets and investments. An experienced financial planner can help you navigate the complexity of a high-asset divorce, protecting your retirement savings and other assets. A financial planner can guide you in reevaluating your retirement goals and assess how the division of assets may impact your retirement plans. They can help you make informed choices about adjusting contributions and investments to maintain retirement security.
  • Working with an attorney will clarify whether you may be entitled to or required to provide alimony. Your attorney will work with you to negotiate a fair alimony agreement that aligns with your financial situation and future needs. Balancing your financial responsibilities with your personal goals will be critical.

Final Thoughts

Taking control of finances can empower women to make informed decisions. Women going through a divorce can educate themselves about financial options, stay informed about their rights, and make decisions confidently as they prepare for their future. Navigating the financial complexities of divorce can be overwhelming. Contact us if you’re looking for help developing a comprehensive financial plan tailored to your unique situation. We’re here to help pave the way to long-term financial security.

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  1. 1 https://www.nytimes.com/2023/05/13/business/divorce-retirement-savings-planning.html

  2. 2 https://crr.bc.edu/wp-content/uploads/2018/06/IB_18-12.pdf

  3. 3 https://www.experian.com/blogs/ask-experian/credit-education/life-events/divorce-and-credit/

  4. https://www.webmd.com/health-insurance/insurance-divorce

  5. https://www.kiplinger.com/retirement/the-divorce-gap-unique-retirement-issues-for-women-over-50


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