If you are going through a divorce, the worst thing you can do for your retirement is nothing. Your retirement will be fundamentally affected by your divorce. It is imperative that you anticipate the effect on your retirement and how you will compensate for the changes. This post will go over some modifications for your divorce.
First, you need to define where you will start. Take account of your assets once your divorce is final, that gives you a complete picture of where you will begin. Make sure you pay attention to the composition of your retirement assets. Once you know your asset combination, you can figure out your shortfall between your current savings rate and your ultimate retirement goal.
Second, rebalance your retirement. You need to rebalance regularly, but it becomes even more important once you divorce. As your goals change, don't forget to rebalance your retirement to match these aims.
Third, don't forget to account for your medical needs. You should estimate around 30 to 35 years of retirement, which includes massive healthcare costs. Health savings accounts (HSAs) allow you to deposit money tax-free and withdraw from them for medical expenses, tax-free. After you turn 65, you can withdraw funds without a penalty. However, they are subject to income tax for non-medical expenses.
Finally, don't forget to account for Social Security. If you were married ten years or longer, you might be eligible to receive benefits based on your former spouse's income.
Are you considering a divorce or separation? If yes, you may want to speak with an attorney to review your options. Divorce legal issues are complicated and affect every aspect of your life, from your children, to your assets, and, yes, your retirement. A lawyer can go over how divorce may affect your life and help you plan for these eventualities.
Source: U.S. News, "4 Tips for Retooling Your Retirement Plan After Divorce," Rebecca Lake, November 8th, 2016