Tehachapi's Online Community News & Entertainment Guide

Financial moves for the recently divorced

Financial Focus

Divorce is common in our society, but that doesn't make it any easier to navigate. If you've recently finalized a divorce, you've likely been coping with uncertainty and tension, but you can still avoid turning an already difficult situation into one that's even more challenging. How? By making the right financial and investment moves, including the following:

• Establish your separate financial presence. Even when you were married, you and your spouse might have maintained some separate accounts. But if you only had joint accounts, now is the time to open your own checking, savings and credit accounts.

• Update your budget. It's likely your budget needs updating. Your household income may be lower or may need to be adjusted for alimony or child support (paid or received). Additionally, your living expenses may have shifted, either higher because you're no longer splitting expenses such as housing or utilities, or possibly lower because you're no longer supporting your ex's spending habits. Understanding your new budget will help you feel better informed about your financials options and more in control of your new situation.

• Prioritize emergency savings. Divorce is expensive and may have depleted your savings. To get back on your feet, you may want to build an easily accessible source of funds for unexpected drops in income and/or spikes in expenses. If you're not retired, you may want to keep three to six months' worth of expenses in emergency savings, although even much smaller amounts can boost your feelings of financial security.

• Evaluate your retirement plan contributions. When you were married, you may have been counting on sharing resources and expenses with your spouse in retirement. But now, you may be solely responsible for your retirement, so if you can afford it, you may want to ramp up your retirement plan contributions. You may want to consult a financial professional about setting and achieving new goals.

• Think about Social Security. Your divorce could play a role in the benefits you can receive. Once you are eligible for benefits, if you were married at least 10 years and you haven't remarried, you might be able to receive up to 50 percent of your ex-spouse's benefits, offset by your own benefit. If your ex passes away and you haven't remarried (or you remarry only after age 60), you could receive 100 percent of their benefit in place of your own. This could be beneficial if your ex-spouse had a higher income or spent longer in the labor force. Since rules can be complicated, contact your local Social Security office to better understand your situation, and keep a record of your ex's Social Security number.

• Review your beneficiary designations and legal documents. You'll likely need to revise the beneficiary designations on your retirement accounts and life insurance policies. These designations carry a lot of weight and can even supersede the instructions in your will. And, speaking of your will, you'll likely need to revise it too, along with other legal documents, such as a living trust. Consult with your legal professional to make these revisions.

It can feel like a long road to stability after a divorce – but by following the above suggestions, you may be able to make the trip a little less bumpy – and hopefully shorter – as well.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Edward Jones, member SIPC.