Men and women nearing retirement who have gone through a divorce are less likely to feel financially prepared than married couples. Women are most likely to feel financially unprepared than men and this is for good reason: According to a recent ING U.S. study, divorced women have, on average, $34,000 less in total retirement savings than divorced men.
However, because of the fear that divorced women have about their readiness, many times they rejoin the labor force. This can mean that they can often make larger contributions to their retirement accounts and even earn larger Social Security benefits. Divorced women who have never remarried are also more likely to delay drawing from their retirement funds, which means they will ultimately have larger savings to draw from when they need it.
If you are divorced and nearing retirement, the best thing you can do is take an honest survey of your own retirement goals based on a thorough assessment of your finances. Here are some questions you should answer about your financial situation in order to plan accordingly:
1. How big of a nest egg will you need at the beginning of retirement if you’ll be retired for twenty, thirty, or even forty years?
As lifespans are increasing, people need their retirement funds to stretch to thirty or even forty years. Women, on average, live two years longer than men, which means that their savings will need to stretch that much longer. A conservative estimate is that you will need to have 8 times your current pre-retirement income in order to maintain your current lifestyle. However, the most important thing is to estimate your retirement expenses in order to come up with an idea of how much savings you will need
2. Do you know the best way to claim your Social Security to maximize your lifetime benefits?
The Social Security Administration offers 567 ways to claim your benefits. Choosing the right benefits at the right time could mean tens of thousands of additional dollars in retirement. In certain circumstances, you are allowed to collect 50% of your ex’s Social Security benefits without filing any additional paperwork at the time of your divorce, as long as you are not currently married and are over the age of 62.
3. If you have a retirement shortfall, do you know how big it is and what can be done about it?
Oftentimes, those going through the process of a divorce feel it is better to keep the house for both sentimental and practical reasons. However, there are ongoing and unexpected expenses that go into keeping your home. After calculating whether or not you have a shortfall, you can determine a realistic scenario, which may include downsizing or, if you are in the middle of a divorce, choosing other financial assets over the house. According to a recent study, the nation’s total retirement shortfall exceeds $14 trillion. This means there are many other people going through similar challenges. Planning ahead, with the help of an experienced professional, will make your financial future far less stressful.