Worried about your retirement? You are not alone, especially when it comes to the question of dividing that nest egg you’ve worked so hard to save and build up. Divorce can be a devastating event, but it doesn’t need to ruin your retirement. For tips on how to protect your funds, here are six steps towards a more secure financial future:
1. Establish Your Own Credit: As soon as you can, start your own savings account, your own checking account, and get a credit card in your name. If you have a joint credit card, you want to try to close that and get it paid off (with both of you contributing). This is key because you don’t want to put your personal savings at risk by having any responsibility for this person’s debts down the road. Having good, established credit also gives you greater flexibility in financial decisions you may want to make later on, including taking out a mortgage or buying or leasing your own car.
2. Understand New Jersey’s Equitable Distribution Rules: Yes, most retirement accounts are subject to division as marital property, but that may not mean splitting your entire nest egg 50-50. For example, if you started contributing to your 401K in 1992, got married in 2002, and then got divorced in 2012, your spouse might only have claim to part of the proceed derived from 2002-2012. Talk to your divorce attorney as soon as possible about the specifics of your retirement accounts.
3. Work With A Financial Planner: As an additional source of assistance, you can also work with a certified divorce financial analyst or certified financial planner to help you create a new budget and plan for retirement now that you are single. The National Association for Personal Financial Advisers can help you find a financial planner in your local area.
4. Keep All Documentation: When retirement accounts are divided, at the end of the process, you will receive a qualified domestic relations order outlining exactly how the assets are going to be broken down and what your percentage is. Don’t lose this! It’s your ticket to making sure that when it’s time for retirement, you get your fair share.
5. Social Security Benefits: Check into this to see if you are qualified to a portion of your spouse’s SSI benefits. In general, if you’ve been married 10 years or more you may be able to get some of your spouse’s benefits, BUT only if your spouse’s social security payments are greater than your own.
6. Don’t Raid Retirement Funds. During divorce, people often spend money on things like buying a new car, security deposits for a new apartment rental, new clothes, and other things they see as important for their new lives (in addition to their legal expenses). It’s understandable, and often very practical, that you need to spend money at this time. But try to do so wisely. If you are in need of a little extra in order to get by, go to friends and family first for a loan, or think about selling anything you own that is not a joint asset. Try your hardest not to tap into retirement funds. If this means waiting a few months before splurging on a new wardrobe, you will thank yourself in your golden years!