As an older woman, a late-life divorce can mean you will have less to live on and less financial security. To avoid trouble, you must know the facts and plan ahead.
How late life divorce can affect your finances
Three financial mistakes you can avoid
1. NOT BEING PREPARED
▪ If you or your spouse is thinking of divorce, make sure you have access to funds and credit for the coming expenses. Have both money and a credit card in your own name.
▪ Get copies of all your important financial documents and legal records before divorce proceedings begin, using a comprehensive checklist.
2. NOT BEING INFORMED
▪ Know what your joint, or marital assets are, including: deferred compensation, retirement options, life insurance, real estate, and so on. Also know your joint debt and liabilities, as well as all expenses.
▪ Know the difference between separate and marital property. This is an area where laws may vary from state to state. Generally, anything you owned before you married is considered separate property. Anything acquired during the marriage (including gifts to each other) is usually considered marital property.
▪ Know what you're likely to be entitled to. You need to understand the difference between living in a Community Property State (where everything in the marriage is split 50-50) or in an Equitable Distribution State (where marital assets are supposed to be split fairly). Be sure you know which kind of state you live in.
3. NOT THINKING FOR THE LONG TERM
▪ Keep in mind the difference between asset market value and asset worth. Getting to keep a paid-off house valued at $750,000 may seem like a great deal, but the worth of that asset is diminished by maintenance costs, utility bills, real estate taxes, and so on. And, if the real estate market goes down when you're ready to sell, you can lose your shirt.
▪ Consider hiring a Certified Divorce Financial Analyst to make sure you've considered all the financial implications (including income and tax consequences) of various settlement scenarios. What looks like a good deal right now can be a disaster in the years to come. Divorce proceedings tend to be a time of strong emotions, rather than clear thinking. An Analyst can help keep you on track.
Divorce and Social Security
▪ After divorce you can still get Social Security benefits on your ex's work record if you were married at least 10 years, are 62 years old, and are unmarried (even if he's remarried). If he's eligible but hasn't claimed his benefit, you can still receive your benefit if you've been divorced for two years.
▪ If your ex has died you could still get benefits if: you were married for at least 10 years and you're at least 60 years old (or 50, if you're disabled).
▪ If you have remarried after age 60 (or 50, if you're disabled), you can still collect benefits. But if you remarried earlier, you would not be eligible.
▪ As a divorced spouse you can get 50 percent of what your ex is due at his full retirement age provided you wait until you've reached your own full retirement age. Otherwise, you'll get a discounted amount—e.g., if you claim at 62, you'll get only 35 percent.