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Separation: Navigating for the Worst
Stay in the loop. Financial planners often tell the story of a widow who doesn't know where her husband kept important financial papers like pension plan documents. It's critical that both spouses educate themselves on everything, just in case. And if you should lose a spouse, through death or divorce, don't make any sudden changes until you have a better sense of your financial assets and liabilities or until you've consulted a lawyer or a financial planner.
It's your pension too. Women tend to live longer than men but earn less over their lifetimes, and that makes it especially important for the wife to make sure she gets her fair share of the retirement money during a divorce. One of the biggest mistakes women make, says pension attorney Cindy Hounsell, is that they let their exes have the 401(k) or pension in order to keep the house. "It's usually better in the long run to sell the house and split the retirement accounts," says Hounsell, president of the nonprofit Women's Institute for a Secure Retirement (wiserwomen.org). "That way, she's locking in something for her own future, and the only time to do that is in the divorce agreement. Afterward, it's too late."
Make a new reality. Divorce often entails extra costs for housing, transportation, child care, utilities, and insurance-for starters. Becky Cooper, 51, of Richmond, Indiana, ended a 27-year marriage last October even though it meant giving up her health insurance and taking a substantial cut in her standard of living. But she's happy to have a job managing a community theater. And because she kept working, she's earned Social Security credits (they're based on your earnings and determine your eligibility for benefits) toward her retirement.
"A divorce is not just about the immediate reduction in your standard of living as you split one household into two," Hounsell says. "The impact on your long-term financial outlook is enormous. You need to revise your expectations about everything from retirement to your career to how you'll cover the monthly bills."
Start by taking a hard look at your budget, she advises. Experiment with new systems for paying the bills. This might be a good time to do your banking online.
Also visit: divorce360.com
One of the most extensive networking sites for people looking to share information and support, both before and after a breakup.
QUICK TIP: Becky Cooper
Running a nonprofit community theater has provided Becky Cooper, 51, with a small but steady income and a safe, fun environment for her 14-year-old daughter, Meghan, after school. "I didn't want to have to raise a latchkey kid," says Cooper. Since her divorce, she has tightened her budget and put her house on the market. She hasn't received many offers, but her ex-husband (who pays the mortgage) isn't pressuring her to sell.
Savings Advice: Last Christmas, Cooper gave family and friends personal letters and cherished pottery bowls she'd been collecting for years. "It's not regifting," she says. "It's taking a treasure that was yours and giving it to someone with a story attached." Cooper says being creative easily saved her $500 to $700.
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