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5 Tips for Divorced Women Preparing for a Single Retirement

The 2020 Retirement Confidence Survey results revealed that while Americans had near record-high levels of confidence in their ability to live comfortably in retirement, just 43% of divorced women felt the same. A lot of reasons are given for this disparity. Among them are:

  • Divorced women have fewer assets than divorced men entering retirement.
  • Women, in general, live on average five to six years longer than men.
  • Women earn about 20 percent less than men, translating to smaller pensions and fewer contributions to their retirement plans.
  • Divorced women are less likely to have calculated their retirement needs.
  • Divorced women tend to be behind the financial learning curve.
  • Women also often take time out of the work force for family obligations

Having been "blessed" with longer life spans, divorced women face an uphill battle against time and money to create enough capital to last for the time they have been given. They need to save more money, yet they have less time and money to do so. Many women who have worked most of their lives to produce a decent income face financial insecurity in their retirement.

But there is good news. Once you're divorced, you finally have complete control of your own financial destiny. No more arguing about finances and money. That can either be liberating or intimidating. What matters now is taking the right steps to secure your financial future.

Once you have separated your assets and secured your portion of the divorce settlement, you can take a deep breath and re-focus your attention on the new future in front of you. It’s time to re-explore your values, set future goals, and build the financial framework to provide for them.

  1. Get a Handle on Your Income and Expenses

If you’re handling your own finances for the first time, you may feel overwhelmed. Start with the basics. Make sure you have enough sources of income to cover your monthly expenses. Your goal is to have a positive cash flow to avoid accumulating unnecessary debt. 

Keep your bills organized to avoid paying late-fees or inflated interest rates. Consider logging your inflow and outflow in a notebook or on a spreadsheet to stay on top of due dates and prevent overspending. It’s easy to neglect your finances amidst the chaos of divorce, but falling into financial instability could cause your transition to be even more difficult than it already is. 

Once you have your monthly expenses accounted for, you’ll want to set aside an emergency fund. We recommend doing this pre-divorce, but if you don’t have one in place, it’s certainly never too late. A fully stocked emergency fund should harbor enough money to cover six to nine months of expenses. This way, if you experience a sudden loss of income or encounter unexpected expenditures, you won’t be thrown off-track.

  1. Reassess Your Investment Needs

Once you are in a positive cash flow and have a fully stocked emergency fund, consider investing. Or perhaps you already have a robust investment portfolio. But whether you are new to investing or are carrying over investments from your marriage, it‘s probable that your financial needs and goals have changed since your divorce. 

It’s important to make sure your investment strategy accommodates your new financial needs and desired trajectory. Your assets may need to be re-allocated to accommodate your risk tolerance level, minimize tax burdens, and keep you on track to meet your new long-term goals. Consult your financial advisor if you are unsure about the best course of action.

  1. Know Your Social Security Options

If you were married at least ten years, you can claim benefits based on your ex-husband's earnings if that is a greater benefit to you then benefits on your own work record. Also, because women have longer life expectancies, you might consider waiting as long as possible (until age 70) to receive higher benefits for life.

To better assess your situation, check out our other article, “4 Questions Every Woman Should Answer Before Claiming Social Security.”

  1. Beware of Investing too Conservatively

Women are known to invest conservatively. They tend to be risk-averse, often gravitating towards more stable investments such as bonds or fixed-yield investments. This can pose a problem for women who are expected to live longer than men as too conservative an investment strategy could potentially lead to an inadequate amount of retirement resources.

On the other hand, women who are educated about investing tend to be better investors than men. They're more patient, more disciplined, and more likely to stick with an investment strategy in the face of adverse market conditions.

Again, education is the key. With knowledge comes the confidence to step outside your comfort zone, which may be required to achieve the level of returns needed to create lifetime financial security.

  1. Develop a Financial Plan

Taking action is critical to getting on the right track financially. But actions without planning can be self-defeating. Think about what you want out of life. Translate that into clearly defined and achievable goals with timelines. For each goal, develop a detailed action plan for how to achieve it. When you know precisely what you're striving for, it's much easier to stick with a plan that will get you there.

You Don't Need to Go It Alone

Divorce can be financially and emotionally devastating, and the recovery period, painful. But if handled with care, this transition can lead to a positive and rewarding future. At Northstar Financial Planning, we are passionate about empowering women to thrive despite life’s unexpected changes. Our Certified Financial Transitionists ® have undergone extensive training to be able to provide the support and guidance clients need in such unsettling times. Contact us today for a complimentary "Get Acquainted" meeting to discuss how we can help you secure your financial future despite an impending or recently settled divorce.

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