As any Illinois resident that has been through it knows, the end of a marriage not only can arouse strong emotions such as anger but also turn finances upside down and make the financial future cloudy at best. In fact, the financial consequences of divorce can last the rest of both former spouses’ lives. And, apart from drafting a prenuptial or postnuptial agreement that can limit the financial damage, there is little a couple can do to prepare for finances after divorce, even if both spouses decide to part in the most amicable way possible.
Where the problem can be particularly bad is when a couple divorces after 20, 30 or 40 years of marriage. This means both spouses have less time to recover financially in time for retirement. Some financial experts believe people need at least eight times their annual salary to meet their long-term costs of living after they retire. Even if a divorcing couple has that much to divide between them-and most simply do not-both spouses take a huge financial hit when they can least afford it.
So what can someone do when divorce is fast approaching? Barring a do-over that allows the introduction of a prenup or postnup and better financial planning-all of which are highly unlikely-a spouse can make sure all assets and properties are accounted for in property division, including all retirement accounts, stocks and bonds, bank accounts and real property.
Splitting marital assets means coping with less for both spouses. Each spouse will have to reduce or change his or her personal expectations about retirement, including when to retire, where to live and what living standard to adopt before and after retirement. These are all possible with discipline, an eye on the bottom line and working with a financial planner.
Source: Market Watch, “Picking up the financial pieces after a divorce,” Chuck Jaffe, April 5, 2015