Divorce can deal both divorcing spouses one of the biggest financial blows of their lifetimes. In fact, experts estimate each spouse will need to increase their individual income by about 30 percent to maintain the same standard of living they had prior to the divorce.1 However, if your ex-spouse was a spendthrift or otherwise wasn't pulling their financial weight, starting out on your own can allow you to finally take charge of your financial future. Learn more about rebuilding your portfolio after a divorce.
Take Stock and Re-Evaluate
Once the dust settles from dividing your assets, taking stock of what's left can be an intimidating (but important) step. You can't improve your financial situation if you don't know what it is, and even if your current situation may not seem as stable as it did before your divorce, there are things you can do to improve it.
A financial professional can help you determine what next steps can reap the greatest dividends. If you had to sell your home in the divorce, your primary financial goal may be saving a down payment on a new one. If most of the retirement accounts were held in your ex's name, you may need to prioritize retirement savings instead. By seeing where you are now, you'll be better able to set goals for where you'd like to be.
Revise Your Retirement Number
One way to quickly feel better about your post-divorce finances is to revise your retirement strategy. Though you may have already had a certain dollar figure in mind to represent your financial freedom, it's likely this figure was calculated based on two salaries—and two adults to support. You may find that you can survive on far less in retirement than you'd planned.
Also keep in mind that, if you and your ex-spouse were married for at least 10 years, you'll be able to claim Social Security retirement benefits on your spouse's record instead of your own if doing so would yield a higher payment.2 (If you remarry before claiming Social Security, this benefit goes away.) If your ex-spouse earns a significantly higher income than you do (or will), this could help boost your monthly retirement income by thousands of dollars.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
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All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
1 https://divorce.usu.edu/files-ou/Lesson7.pdf 2 https://www.ssa.gov/benefits/retirement/planner/applying7.html#:~:text=on%20your%20record.-,Benefits%20For%20Your%20Divorced%20Spouse,is%20age%2062%20or%20older.
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