Many Winter Park residents plan their financial lives very carefully, but a divorce can upset the most carefully laid plans. Some divorces can reduce retirement plans to financial rubble, leaving one or both former spouses in financial shock. The age of the spouses often affects their ability to recover their financial health, but according to knowledgeable financial planners, no one is without viable solutions.
For example, a Florida man got divorced at age 40, and the divorce, in his words “burned everything to the ground.” Fortunately, the man had a financial planning background, and he knew that his age gave him a significant advantage: he would be able to save money and watch it compound for at least 20 years. He is now 61 and getting divorced a second time, but he has built on what he learned after his first divorce and feels that he is better prepared this time.
Some assets can be easily divided in equal shares, such as the equity in a home. Some retirement plans, however, can be difficult to divide fairly because the income tax code places many restrictions on the source and amount of contributions. Some corporate pension plans cannot be amended to change the beneficiary or allow a change in how contributions are made. Some planners advise their clients to place their share of a retirement plan in Roth IRA; even though the amount transferred may be subject to federal income tax, the remainder can grow tax-free.
The most important aspect of post-divorce financial recovery is the party’s attitude. A person cannot rebuild a nest egg without moving beyond the anger and bitterness of the divorce. Seeking expert advice from a knowledgeable divorce attorney may help restore perspective and generate a positive attitude.