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4 Financial Must-Do’s After You Sign Your Divorce Papers

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By Laurie Itkin
 

According to a 2016 report by the National Institute on Retirement Security, women over 65 are 80% more likely to be impoverished than men of the same age. Although you might not be hitting age 65 for a long time, now is just the time to take four important steps that will ensure your financial comfort and security in your golden years.

 

1. Secure and Manage the Assets That Are Now Yours

Whether you went to court or entered into a settlement or separation agreement with your ex-husband, chances are you and he must divide marital property. You might, for example, be set to receive a portion of his retirement account. You think you are done with paperwork because the divorce is over? Sorry to disappoint you but assets don’t transfer themselves. Getting money from his retirement account to your retirement account involves documents and time. But don’t delay! This is your retirement money now and it must be invested in a way that is appropriate for your needs as a single woman.

 

Does it really matter if you don’t get around to the paperwork in a timely manner? Yes it does. One of my clients kept reminding her ex-husband that he needed to “roll over” his 401(k) into an Individual Retirement Account (IRA) so he could then transfer half of his IRA to her IRA. This process took over a year because he was very busy and frankly couldn’t be bothered to do it.

 
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The delay was costly. I had already been managing the investments in her brokerage account and calculated that if I had invested her IRA using the same asset allocation (instead of the conservative one the ex-husband was using), her IRA would have increased by an additional $12,000 over just that one year.

 

The reverse can also happen. What if his retirement account was invested too aggressively and by the time the funds were transferred the value had declined by 20% or more?

 
READ ALSO: How to Retire on One Income
 

Another client of mine was supposed to receive a percentage of her ex-husband’s annual bonus and vested restricted stock units each year. It wasn’t until she’d sent a threatening email – almost three years after their divorce was final — stating she’d take him to court if he didn’t comply with the terms of their settlement agreement that he finally wrote her a check for over $100,000.

 

The bottom line is that once the divorce is final, certain assets are now yours. Make sure they get under your full control as soon as possible!

 
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2. Leave Room in Your Budget to Pay Yourself

One of the biggest challenges recently-divorced women face is ensuring that monthly expenses don’t exceed monthly income. Otherwise they land deeper and deeper in debt. But unfortunately it isn’t enough to just be able to pay the bills. You need to take a portion of your income each month and set it aside for your future.

 

Paying yourself is just as important as paying the cable or wireless phone bill. This can take the form of an IRA, your employer’s workplace retirement account, or even a brokerage account where you can invest in stocks, bonds, real estate and other asset classes.

 
READ ALSO: How to Take Your Financial Challenges and Turn Them Into Life Goals
 

If you aren’t familiar with the concept of “compound interest” now is a great time to learn. For example, let’s say you invested $5,000 in a tax-deferred (or tax-free) retirement account. If you were able to get a 7% annual return, your money would double to $10,000 in about ten years. That’s good, but if you decided to add just a small amount of money to this account every month, you’d be shocked at how quickly you could accumulate a large nest egg. It happened to me. I started investing in the stock market at age 24, and by adding money to my brokerage and retirement accounts each month, became a millionaire before I turned 40.

 
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3. Learn How to Invest Your Money So it Will Grow

But how exactly does one get a 7% return on her money every year? Unfortunately, there is no guarantee that investors can achieve that rate of return each and every year. All types of investments — stocks, bonds, and real estate — carry risk. But the biggest risk of all is not investing your money. Inflation is real and it eats away at the value of your savings over time. It is not good enough to merely save your money – you must invest it. Unless you are confident that your social security or pension checks will fully cover your annual living expenses, the sooner you learn how to invest your money, the better.

 

My online course, The Recently-Divorced Woman’s Guide to Financial Independence, contains an entire curriculum devoted to helping you master these three important financial steps I just discussed.

 

4. Hire An Expert

While you can educate yourself by taking an online course, you might decide to hire a financial advisor to help you achieve financial security. Now that you don’t have a husband involved in the decision, you’ll get to decide who you like and trust to support you in this sometimes overwhelming journey.

 
About the Author
Laurie Itkin is a financial advisor, certified divorce financial analyst (CDFA) and the author of the Amazon bestseller, Every Woman Should Know Her Options. To address the needs of women who suffer from post-divorce financial anxiety, she created an affordable online course, The Recently-Divorced Woman’s Guide to Financial Independence, that educates and supports recently-divorced women as they transition from married to single life. You can request a free consultation or subscribe to Laurie’s newsletter by visiting TheOptionsLady.com.
 

Financial advisor Laurie Itkin shares four important steps that will ensure your financial comfort and security in your golden years.
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