Making a Separation and Its Financial Impact

Nobody ever gets married with the thought that it will end in divorce. But it happens, and you are certainly not alone if it has happened to you. Along with the emotional issues that confront you, there is a new financial reality in your life as well. Such a separation represents a major transition from a financial perspective, and you need to take the right steps to make sure your financial security is still in place after the divorce is finalized.

Life insurance
Whatever coverage existed prior to the divorce, it is likely to change in the new environment. At a minimum, beneficiary designations may be affected. More than that, you will likely need to consider adjusting current policies or purchasing new ones to meet your revised protection needs.

Personal financial issues
A number of issues suddenly become much more complicated, such as:

• How will regular expenses be paid? Alimony and child support payments can become a big factor for either party in a divorce. No matter what, your own ability to earn income to support your needs will become a more important factor, and your financial lifestyle may be adversely affected by the divorce.
• Who will pay for the children's college expenses? Making sure the future of your children remains intact is an important part of any divorce settlement.
• As a couple, your housing costs may come close to doubling, now that you will be living in separate places. Again, this places a new burden on both parties.
• Make sure you change beneficiary designations on bank accounts, investment accounts, pension plans and living trusts.

Beyond that, you need to look at investing in a whole new light. Now that you are facing a new stage of life, you have to seriously consider what you can do on your own to meet your retirement needs:

• If working, try to put as much money as possible into your workplace retirement savings plan. IRA contributions can help augment your nest egg.
• If you don't work but have available dollars, a variable annuity can allow you to grow assets on a tax deferred basis, providing important protection for your retirement. For instance, if you can take a portion of a cash settlement in the divorce and put it to work in a tax-deferred annuity, you can help position yourself for a more prosperous retirement.

Content is for informational purposes only and may not accurately reflect your specific situation. Information is not intended to provide financial, legal, tax, or accounting advice. You should consult a qualified advisor for advice specific to your own circumstances.