How To Prepare For The Financial Challenges Ahead And Take Control
When you find yourself suddenly single due to divorce or the loss of your spouse, you may come to face unique financial challenges, especially when heading into retirement.
According to “Still Shortchanged: An Update on Women’s Retirement Preparedness,” a report by the National Institute on Retirement Security (NIRS), divorce poses a major challenge to women’s ability to save for retirement.[1] The same report found that widows – especially retired women over 80 years old – suffer a major decline to their income when their spouse dies.
Despite the challenges and hardships you may face, you can take control of your finances and the future you envision for yourself.
How does getting a divorce affect your retirement savings goals?
According to the NIRS report, married women between the ages of 18 to 64 are better prepared for retirement than widows and divorced women. Depending on the divorce settlement and the state where you live, your ex-spouse may be entitled to a portion of your employer-sponsored 401(k).[3] He could also receive part of your IRA, pension, or other retirement plan. Fortunately, splitting retirement savings in a divorce is a two-way street, so you may also be entitled to a portion of your ex-husband’s 401(k), pension or other retirement plan.
Where do widows and divorced women typically get their income from?
According to the NIRS report, married women typically rely on Social Security benefits for around 50% their retirement income. Social Security benefits comprised 53% of divorced women’s retirement income and nearly 60% for widows.
So, what can divorcees and widows do to gain control of their finances?
It’s vitally important for a divorced woman or widow to strategically plan their finances for the future.
Did you know that by the age of 64, 1 in 4 women reported being on their own due to separation, divorce, or the deaths of their husbands? And of the widows now living in poverty, 80% were not living in poverty before their husbands died. On a positive note, many more women are taking control of managing their own money and there are steps you can take to get your finances in order.[4]
Be Proactive
We understand that the way women manage money is different to the way in which men manage their finances. Regardless of how women manage their money compared to men, all women need to have a sound financial plan in order to protect themselves, especially in times of crisis or stress.
When it comes to finance for widows and divorced women, an ounce of prevention is better than a pound of cure. If you have a plan for your finances before you become single and stranded allows you to plan effectively for your financial future — whatever the future may bring.
- Make a Budget
One of the most important things you can do to take control of your finances is to set, or realign, your budget, which will help you track where your money is coming from and where it’s going. A sound budget will give you power over your money. It will also allow you to designate some of your money to some sort of savings to help alleviate some of the pressure in the event your household loses a portion of its income after a divorce or death of a spouse.
Get Professional Help
One of the most difficult things in life is dealing with the loss of a spouse, whether due to divorce or death. These life altering events can leave you stressed, emotionally compromised, and overwhelmed at a time when you’re going to have to make many important financial decisions. Although your family and friends may be able to provide much needed emotional support, you should also have some professional support.
To help guide through this difficult time, having a trusted financial advisor in your corner can be an enormous help in alleviating the pressure and uncertainty you might be facing. As your financial advocate, we are ready to listen to your needs and goals and what you envision for yourself. HMC Partners will work with you to help get you through this stressful and chaotic situation. We’ve also put together a comprehensive checklist to help guide you in your journey towards retaking control of your finances and pursuing your goals.
CONTACT US to receive your copy of our Checklist for Divorced or Widowed Women.
Sources:
[1]National Institute on Retirement Security
[2]Census.gov
[4] https://www.loansolutions.co.za/finance-for-widows-and-divorced-women/