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The Montana Estate Lawyer

Friday, September 22, 2017

5 Retirement Planning Steps to Take When You Divorce

I came across a short but important article related to retirement planning that was included in the June 15, 2017, Financial Advisor Magazine.   The article is entitled, "5 Retirement Planning Steps to Take When Clients Divorce," authored by Christopher Robbins. Although the article is targeted specifically to financial advisors as practice tips when speaking to clients, the content is something we should all keep in mind.  From this article, I have listed below the 5 steps that you should take if you have gone through divorce.

1. Make sure your retirement plans are divided according to the divorce agreement.

This issue is twofold: making sure that all of the parties in the divorce have an understanding of how much money is in each partner’s nest egg and that the retirement accounts are fairly divided. All assets should be distributed in accordance with a qualified domestic relations order, or QDRO, which is the plan created in divorce court to split retirement assets.

2. Change the beneficiary on your retirement accounts.

It’s up to you to follow up and make sure that your ex-spouse is no longer the beneficiary on your retirement account after a divorce, if that is what you desire. Do not rely solely on the Montana statutory scheme that appears to have the legal effect of revoking your designation of a spouse as a beneficiary.  Is s prudent to do an audit of all retirement plans and life insurance policies to review how the beneficiaries are structured.

3. Review your Social Security options.

Under certain conditions, you may be able to claim your ex-spouse’s benefits Social Security benefits. If a divorced client was married to his or her spouse for at least 10 years, and did not re-marry prior to age 60, he or she can collect Social Security based on the ex-spouse’s work record.

4. Review and re-establish retirement goals.

Because planning for an individual’s retirement is different from planning retirement for a couple, divorce provides an opportunity to create a new plan. You may want to retire earlier or may not be able to save as much, requiring new strategies to reach your financial goals.

5. Reassess your’ investment allocations.

For divorced individuals, especially women, it’s important to review investment allocations to make sure they are still suitable and in your best interest, particularly in a case where your ex-spouse strongly influenced the asset allocation.  Oftentimes you may that your investment allocations are based more on your ex-spouse’s risk tolerance than their own.  Perhaps your goals are different, the timeline for retirement has changed or you find that your financial outlook is different than when you were a couple.

Jon


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