Are you retired and getting divorced? Now is the time to consider your financial arrangements.
December to March can put a strain on all of us. But it can be especially challenging if you have been having ongoing relationship problems with your spouse. While festivities in December probably meant higher than average spending activity for your household and plenty of social events with friends and family, like many of us; a quiet January is a time to pause and reflect on areas of your life which you aren’t happy with.
You’re Not Alone
And you’re not alone. January 6th has been dubbed ‘Divorce Day’ by Solicitors and Lawyers. And January 24th is supposedly ‘the most depressing day of the year – with bills and finances, short, darker days and relationship & career issues to blame. Valentines Day is just behind us too, so it’s easy to see how this time of year can be the breaking point for rocky relationships.
Divorce among the over 65’s has been steadily rising for the last 15 years. According to the Office of National Statistics, their publications on Divorce show that between 2005 and 2015 the number of women over the age of 65 getting divorced rose by over twenty percent, while the number of men at retirement age increased by around eight percent.
Retired and Getting Divorced – The Reality
If you’re over 65, retired and getting divorced, it’s likely that at least part of your married life was spent with one person as the sole breadwinner or one of you earned significantly less than the other. Or it may be that you retired early while your partner continued working or vice versa. Perhaps you’re both approaching retirement and have decided that divorce is the best option for you both, which is why you’re considering how this will impact you when you do retire.
Either way, while things like custody of children or agreeing how to support them financially might not be an issue anymore because they are usually living independently at this point. The question of how you or your spouse will be able to live independently following the divorce becomes the most concerning factor at this stage in life.
It’s not all doom and gloom, though. If you’re reading this, you’re already taking a pragmatic approach to your situation by starting to figure out how your financial income and assets as a married couple will be divided in your divorce.
First things first – will I need a Financial Adviser for my divorce?
During your divorce you can use the help of a few specialist advisers. Solicitors for the divorce proceedings itself. Mortgage Advisers to help ascertain income requirements and a mortgage. And Financial Advisers who can help with looking at cash-flow and your future.
This is a difficult and emotional time which can be eased a little by having a team who can assist you in the various moving parts of the process. It’s not pleasant to have to consider your future following your divorce proceedings and how that can be achieved. A Financial Adviser will work with you to figure out how much income you need, as well as how this could be generated from assets which were shared when you were married.
Most Financial Advisers will offer an initial complementary meeting and will be sympathetic to your circumstances. Which means if you think you might need or want to work with a Financial Adviser during your divorce proceedings, you should ask if they will be able to offer you a complementary meeting to talk about your situation. It’s important you feel comfortable with everybody you work with during this difficult time and an initial meeting will help you to decide who you think is best for you.
Splitting Assets in a Divorce – What do I need to think about?
How much income do you need?
You will need to figure out how much income you need now and in the future. When divorcing or separating, it is important not to just think about assets, but to think about income requirements. It’s important to ensure expectations are fair and the amount you receive is also fair to support your income needs.
This could be to:
- Pay the mortgage (if you take on the remaining mortgage on the family home or have a small mortgage on your new home).
- Pay bills.
- Maintain a reasonable lifestyle.
- Support your retirement.
How will this income be generated?
It is also important to consider how income could be generated from your joint wealth:
Would your ex-spouse need to pay you maintenance and how long will this last for? How would you generate income after the maintenance ceases?
Do you have assets that could generate an income for example investments or property? How much will these generate and how much will you be entitled to?
Cash Flow & Money Management
If you receive a lump sum payment, how will this generate an income for you and how much income will it generate? You will also need to think about the implications of income not being paid for a period of time and how this will impact you, such as rental voids or falls in the stock markets. How could you do this?
Your Living Arrangements
Look at the housing market – see what’s out there and how much you will need. You could talk to a mortgage adviser regarding how much you could reasonably afford to borrow or how much income you would need to get a house that suits your requirements. You could also plan to take over the mortgage on the family home.
Remember it’s not all about property.
Most separating couples will turn to the obvious tangible assets to start with, like the house, additional properties you may have and any other high value assets you own together. But did you know your pensions are likely to be worth more?
In the latest release of Pension Wealth in Great Britain published by the ONS, it showed that total private pension wealth in Great Britain was £6.1 trillion in April 2016 to March 2018 (42% of total wealth). Up from £3.6 trillion (34% of total wealth) in July 2006 to June 2008, after adjusting for inflation. While these numbers might seem too big to wrap your head around, they show just how much wealth is tied up in pensions.
It’s understandable why you might feel like avoiding pensions or other aspects which seem complex and instead figure out assets like property which are simpler to value and divide in a divorce. But this goes to show pensions mustn’t be ignored and are becoming increasingly relevant in divorce proceedings – especially with the increase in divorces for those in retirement. Despite the fact the majority of the United Kingdom’s wealth is tied up in pensions, my blog last year on Financial Advice & Divorce revealed that research by Scottish Widows showed pensions were only discussed in 30% of divorce cases.
If you can, seek individual advice as early as possible so that analysis can be carried out as thoroughly as possible on your finances. Pensions are really complex. It’s important that a professional is involved especially if there are multiple schemes or large values. It’s also worth remembering that for defined benefit schemes with a value of over £30,000 a Financial Adviser will have to provide any advice to you.
Would you like to know more about pensions or the other financial implications of going through a divorce? There is more guidance and insight for you on my blog. You can also contact me via the website to arrange a complementary initial meeting or email me at firstname.lastname@example.org. It’s okay if you’d like to explain your current circumstances to see if I can help before we arrange to meet.
I hope this article has helped you to begin to form a clear list in your mind of what needs to be considered during your divorce and if we don’t meet, I hope you have a content and financially stable future ahead of you once your divorce proceedings are over.