At any point in your lifetime, finalizing a divorce can be stressful. But divorcing after the age of 50 comes with its own unique challenges. Those who divorce later in life can find themselves scrambling to secure financial freedom before their anticipated retirement.
In addition, as you advance in age you need to look more towards your estate and making directives for end-of-life care. While it may still be a long way off, making plans now can help you secure both financial freedom for your retirement and peace of mind for the new beneficiaries of your estate. (For more from this author, see: 5 Financial Steps You Need to Take Before Divorce.)
1. Create a Budget Geared Toward Retirement
You should always create a new budget before the end of your marriage to account for income changes and the extra expenses that come from living on your own. When you are looking at a divorce that occurs later in life, you will need to create a budget that projects what your living expenses will be - both in the immediate future and once your retirement is official.
How much will you need monthly to comfortably move forward? To be secure on your own, this bottom line may mean working for a few extra years.
2. Boost Retirement Savings With Annual Catch-Up Provisions
Your retirement savings could be cut in half when your divorce is finalized, depending on which state you live in. If your retirement savings do not put you where you hope to be for your soon to be single lifestyle, you will want to contribute a little more money to your retirement accounts.
When you craft your new budget, try to add in a line item that will take advantage of the provisions allowed by the IRS for your retirement savings. Below are the IRS’ catch-up provisions for individuals over the age of 50:
- Up to $3,000 in catch-up contributions via a SIMPLE IRA or SIMPLE 401(k).
- Up to $1,000 in catch-up contributions via a traditional or Roth IRA.
You may also be able to make catch-up contributions to a 403(b), non-SIMPLE 401(k), SARSEP, or governmental 457(b) retirement savings plan. For more details on how much extra you can contribute each calendar year, refer to the IRS or your specific plan.
3. Modify Estate and End-of-life Directives
While you might be hyper focused on your impending retirement, you do not want to forget to make changes to your estate. Alter your living will to exclude your soon-to-be ex from what remains of your single estate. You may want to include children, grandchildren or charitable organizations as the beneficiaries of your remaining retirement savings and assets upon your death.
You also do not want to forget to change your power of attorney. Nothing would be worse than having a medical emergency and only your ex has the authority to make medical decisions on your behalf. While you are visiting your legal representative to make changes to your living will, you will also want to remove your spouse as your power of attorney.
Divorcing later in life can be daunting because of the financial headache involved in reconfiguring your retirement and planning your new estate on your own. However, it is possible to secure your financial freedom even as those items loom large on the horizon. Consider the helpful tips that will put you on the path to independence and a comfortable retirement. (For more from this author, see: 3 Steps to Divide Your 401(k) During Divorce.)