How To Start Over Financially After Divorce And Still Retire When You Want

Divorce will split your income in half. When you have one income rather than two, it can feel like you're starting over, which can be scary at age 40 or 50. Divorce can also impact your savings and retirement accounts which may move your retirement timeline. It's possible to rebuild financially after divorce, with the right short-term and long-term retirement strategy.

How to start over after divorce with no money

No matter your age, it can feel like you're starting over financially when you get divorced. You have to re-evaluate your budget and retirement goals. You may have to sell your long-term home to avoid being house poor.

After a sudden shift in marital status and financial status, you may have to go back to basics. In the early days, it’s all about financial survival. Let’s face it. When you divorce, your expenses skyrocket overnight. Instead of splitting the rent, you’re paying it all yourself.

Living paycheck to paycheck is manageable but uncomfortable. It’s more difficult if divorce brings your savings account to zero and you know what life is like with healthy savings.

Don’t focus on what you lost in the divorce. Focus on what’s next. Then create a financial plan to reach those financial goals.

Dave Ramsey calls it finding your four walls. These include food, shelter, utilities, clothing, and transportation. Create a budget that focuses on your four walls. These are the things you need every day to survive.

Consider your cost of living. Are you in a city where it's expensive to live or could you move somewhere else, like to the Kansas City area, which features affordable homes, a low cost of living, with world-class attractions and events?

You may be tied to a specific geographic area or school district if you have kids, but if you don't, consider a move to save money.

If you have divorce attorney fees, ask for a payment plan. Create a budget that’s manageable with your new financial situation.

While it’s hard to do, let go of any outstanding debt. Usually, this is a house. It’s not always easy, but it’s best to put yourself in a spot where financial goals are possible again.

Divorce and retirement accounts

It's common to split up your 401(k) and other retirement accounts during a divorce. It comes down to where you live and the terms of your situation.

In community property states, assets are split equally 50-50. The majority of states are common law, though, and it depends on the circumstances.

When Alvin Franks went through a divorce after 20 years of marriage, devastation set in. On top of losing his life partner, he also lost more than half of his 401(k). At age 50, he was starting over financially and emotionally, choosing a new road to travel.

“At 50 years old, it’s too late to make up my 401(k),” Franks said.

He had to go down another financial path, which can be scary.

While retirement investments will cut into your day-to-day expenses, and don't touch your nest egg unless it's your only other option. You could pay an even bigger financial price.

Also, try not to cut back on investments. You'll be leaving money on the table.

Take advantage of the TSP government match and 401(k) match

Regardless of your situation, take advantage of free money.  That's your company's match.

If you're a federal employee, you have an advantage over a private sector employee because you get an automatic 1% contribution from the government to your Thrift Savings Plan (TSP). No investment is needed, although you should invest something to take advantage of the match opportunity.

In addition to the automatic 1% contribution, there's a federal TSP match. Federal employees can get a match up to 5% of your contributions.

Even if you can only contribute 1% after a divorce, you'll still get the 1% automatic payment plus the 1% match and your 1% investment, bringing the total contribution to 3% of your salary. In effect, you're tripling your money!

For certain employees, the government automatically sets how much you contribute. You can change this by logging into your account.

If you're a private sector employee, what's the minimum you must invest to receive the company match? Try to take advantage of that, and if possible invest as much as you can to get the maximum match.

Whether automatic or not, the private and public sector matches equate to free money. Take advantage of those opportunities when you're starting over after divorce with no money.

Take small steps, and focus on your day-to-day budget. Even if your budget shrinks considerably, try to make room for some retirement investments. Most importantly, don't leave money on the table.

Divorce after age 50

When you divorce after age 50 or even after age 40, other life circumstances probably affect your finances.

Your professional situation may change, your kids may go to college, or you may have to financially care for an elderly parent.

Franks' experienced work changes. He had a pension plan, which he was fully vested in, after 24 years as a maintenance manager for a Midwestern manufacturing company. But, his company froze the pension plan, limiting growth.

His company offered long-standing employees an early retirement buyout. When this happens to you, there are questions to ask yourself about the early retirement package. It's one of the financial signs it may be time to retire early, but it shouldn't be the only sign you consider.

With more years to work, Franks faced a crossroads. Should he retire early from his current employer and find a new job at age 50? Or stay the course? Both choices seemed risky.

When you divorce in midlife, choosing the best financial path is difficult.

For the avid RVer and motorcycle enthusiast, Frank's finances were on cruise control. The unexpected speed bumps in life forced Franks to change financial directions. So close to retirement, Franks knew he needed to take the right steps to avoid even deeper financial setbacks.

Set new financial goals

Now that you’ve survived the divorce, starting over means creating new goals. What does your finish line look like – is it retirement or paying off your child’s student loans? How are you going to get there?

Financial risks were not part of Franks' financial plan. He was a conservative investor who continued with his company's investment strategy. Based on his retirement age, his portfolio was invested in the one-size-fits-all retirement plan.

After the divorce, he had to change his retirement planning goals and strategy, and he consulted a financial expert to help him make the right choices.

Creating a new retirement strategy is challenging and risky for anyone. However, as an avid biker, Frank knows risks lead to rewards. He faces the risk every time he hops on his bike and rides the open road.

“You are more attentive to what’s going on. You can smell stuff you can’t smell in a car,” Franks said. “Riding in pine trees in Colorado in the summer is an incredible sensory experience because you smell that fresh pine.”

Finding a financial planner

Franks was open to creating a financial plan in a new way, not as a do-it-yourself with a set-it-and-forget retirement plan. He chose to consult an expert to ensure his financial plan takes advantage of every investment opportunity in the limited time before retirement.

You may even look for a planner who has been through a divorce. Empathy goes a long way toward helping you reach your goals. Especially since trust may be an issue after divorce. A financial planner whose been in your shoes may be what’s best for your financial situation.

Starting over is always uncomfortable. Find a planner who can make it a smooth ride.

Franks relied on referrals from friends and found a trusted adviser with a proven background. Interview your planner like you did your divorce attorney.

Ask the potential financial advisor these 10 questions. You may want to skip these questions. 🙂

Types of financial advisors

Like hiring a divorce attorney, all financial planners offer something different.

Credentials are critical when choosing a wealth manager.

With much of his life, as he knew it in his rearview mirror, Franks hired a fee-only financial advisor to manage his money.

A fee-only advisor always acts like a fiduciary because he doesn’t take commissions. You pay the advisor a set fee. That way he steers you toward products that are truly in your best interest.

It’s more money out of Franks' investments, which is tough to accept after losing half his 401(k). Franks knew he had to start over, and he knew investing on his own would not give him the best chance at rebuilding his retirement.

“I just realized I didn’t have the time or passion for taking care of it,” Franks said.

He pays a flat fee yearly for the certified planner to manage his money.

He pays someone else to watch the market and his retirement funds for him.

It allows Franks to focus on his strengths. He manages projects at his manufacturing plant by day and plans his next road trip at night.

“I’ll probably work until I die because I enjoy work. But, I want to make sure I have the ability to do things like travel,” Franks said.

When you hire a professional, they may have more than one credential. For example, Todd Minear is a CERTIFIED FINANCIAL PLANNER™ in the Kansas City area.

That means he follows a strict set of professional guidelines and has met rigorous education and experience standards.

If you're a federal employee, look for a Federal Benefits Expert, like Kelli Harpe, on our team. With experience as a federal employee, she knows how to navigate federal benefits and retirement options.

Update beneficiaries

When you start over after divorce, you realize the value of many things that perhaps you took for granted.

Details matter. They can make the difference between starting over and reaching your financial goals.

Look over your beneficiary designations and make sure they are up to date.

Estate planning

If there’s one benefit to starting over after a divorce, it’s that you realize life can change in a flash. You need to plan for the unexpected and that includes estate planning.

Death isn’t something anyone wants to talk about. Yet, it’s a reality of life. One we must plan for to protect surviving family members.

Create a will and power of attorney, so the plan is clear.

Also, reassess your insurance needs. Do you need more life insurance now?

Your financial planner can help connect you to other professionals, like an estate attorney, who can help with estate planning.

Divorce finances

Starting over is always scary, especially at age 40 or 50 when the end is in sight and you're close to retirement.

Don't stress over divorce finances. They'll fall into place with time.

Remember, investing is a marathon rather than a sprint. While the outlook may seem foggy, you will figure it out.

Take time to continue doing what you love, whether it's hitting the open road like Franks, or hanging out with friends.

Don't go it alone. Get someone on your side, like a financial advisor. Bounce ideas off them or a trusted friend, who is not as tied to the emotions of the divorce. They're also not tied to the money, so they can give you a non-judgmental opinion.

It'll be less intimidating to get a handle on your divorce finances with a trusted financial advisor, and it'll help you make smart investment strategies for today and tomorrow.