Divorce: ‘A Major Financial Impact’
By Deborah Jeanne Sergeant
Don’t entertain divorce as a choice for improving your financial situation. It likely won’t, according to area experts.
Jeff Feldman, certified financial planner and owner of Rochester Financial Services in Pittsford, advises clients to stay married for the sake of their finances, unless facing domestic or financial abuse.
“People should not take divorce too lightly otherwise,” Feldman said. “It’s a major financial impact. A lot of people divorce for the wrong reason and they think things will be better if they divorce and from a financial standpoint, it’s a lot worse.”
The old adage “two can live as cheaply as one” holds some truth when it comes to utilities, shared skill sets and housing expenses.
In New York, divorcing couples equally share marital assets, regardless of which person earned more. Any retirement accounts, including a 401K, 403B, IRA, or ROTH IRA plans, will most likely be divided.
“If you’re on the receiving end you’ll have to decide if you should roll these assets into an account or cash them out,” said Diana Apostolova, a financial consultant with AXA Advisors, in Rochester. “If you decide to cash them out, you’ll need to understand the tax and long-term consequences related to each. Similarly, any non-retirement accounts, cash value of life insurance policies, vacation homes and any other join assets, including join and business ventures.”
Debts are also divided, so petitioning the court for division based upon income can help keep the division fair.
She added that adjusting one’s lifestyle to one income, looking for employment (or more lucrative employment), and liquidating assets are all key to financially surviving divorce.
In addition, people who still have minors at home may need consider curtailing their expenses, such as after -school activities.
“You may have to consider how to save and pay for their college expenses, weddings and grandkids,” Apostolova said. “If you have disabled children, you may have to plan very carefully how and who will take care of them in your absence, including while you’re at work or if you were to pass away unexpectedly or expectedly, and the financial implications associated with each action.”
Keeping the home may be very difficult. The home’s expenses, as Feldman alluded, may be too difficult. Downsizing may make more sense rather than rattling around in a large home alone.
Trish Blake-Jones, owner of Blake-Jones Mediation in Rochester, helps couples work through the complexities of divorce.
“The most important thing when you’re divorcing after 55 is you don’t have the same runway to recover financially as when you’re divorcing as a younger person,” Blake-Jones said. “It’s more deleterious at this age. A Bowling Green University study about divorce indicates that boomers are five times more likely to be in poverty if unmarried than if married.”
Blake-Jones said that the largest segment of her clients are 55 and older, and most of those are women; however, women tend to not work through the divorce in a confrontational way. Instead, many women think of assets and debts in a more emotional way, such as who keeps the house.
“Someone may be clouded by her sentimental feelings towards her home, but hasn’t thought about it needing $10,000 in repairs in the next five years,” Blake-Jones said. “The cold, hard reality is that staying in a house isn’t usually the best idea. It may not make sense for a single person to maintain that asset.”
Budgeting and understanding income versus debt can help many people better prepare for how their finances will look after divorce so they can make better choices during the process. Relying upon the other spouse to offer a fair settlement nearly always ends up with an unfair settlement. If both parties agree, that’s how the judge settles the divorce, even if one receives significantly more assets.
Blake-Jones recommends seeking help from a certified divorce financial analyst to help understand the current financial picture and the outcomes of taking different steps related to divorce. For an amicable divorce, a mediator like Blake-Jones can help reduce the cost of the divorce since the lawyer is needed only to look over the paperwork.