Getting a divorce late in life can ruin even the best retirement planning.
"It's hard to divorce emotions from your financial situation, but if you don't, you'll live with the consequences for a long time," says Ann Dowd, vice president of retirement and investing strategies for Fidelity Investments.
Dowd offers several pieces of advice that can contribute to what actress Gwyneth Paltrow has dubbed "conscious uncoupling," the kind of divorce that strives to prevent either half of the couple from being a loser.
- Assemble the experts. Ask your financial planners or accountants to coordinate their efforts with that of your divorce attorneys to construct a plan that maximizes the likelihood that both of you will be able to live comfortably in retirement.
- Duplicate all the records. This way you and your heirs won't have to track down information related to the other half of the divorced couple every time someone needs an old tax return or a copy of an annuity or an insurance policy.
- Understand who owes what. Especially in the nine community property states, you'll be held responsible for debt incurred during the marriage, even though your name isn't on it. "It is important to deal with those debts as part of the divorce arrangement. Debt laws are very detailed and specific, and you have to understand where you are," Dowd says.
- Think hard about whether you really want to keep the house. "It's a very emotional decision," she says. "But it is really critical to think it through and decide whether you can afford to maintain the house or whether the money you would get from selling it could be used in better ways."
- Make sure you get your fair share. When you're faced with this kind of emotional pressure, it is easy to be too accommodating. Don't discount the value of the time and effort you spent helping a spouse build a business or get through graduate school.
- Understand what you'll get from Social Security. Working together and agreeing to delay claiming so both spouses are entitled to as much as possible can provide a financial cushion for both retirements. Of course, to get spousal benefits based on your ex's record, you must have been married for at least 10 years before the divorce.
Because the cost of a single retirement is going to be much higher than the cost of living as a retired couple, it is "all the more important to step back and plan and make sure that you are managing this transition financially," Dowd says.