Once the immediate financial decisions surrounding a divorce have been made, attention naturally shifts towards the future. Retirement, homeownership, and other long-term goals may still be priorities, but in many cases, the resources at your disposal have changed. What once seemed like a clear financial path may now require a fresh look.

The challenge is that the original destination, and the assumptions used to reach it, may no longer be relevant. Your previous financial plan was built around circumstances that no longer exist, so rather than measuring your progress against a plan designed for two people, the objective should be to build one that reflects your life today.

 

Redefining Retirement Expectations

The first step in rebuilding financial independence is to revisit your retirement projections.

Your accounts, income, expenses, and retirement date may all look different following a divorce. Retirement may also look very different from how you envisioned it while married. It’s important to work backwards from your personal ambitions first— what do you want retirement to look like? Once that’s established, you can then figure out what financial resources you’ll need to reach that vision.

A qualified domestic relations order (QDRO) may also have changed the composition of your retirement savings. Depending on the settlement, you may either have received a portion of your former spouse’s employer-sponsored retirement plan or transferred part of your own plan to them. Understanding what you now own, how those assets are invested, and the rules governing access to them is essential financial planning.

With an updated picture of your assets and liabilities, you can begin evaluating what life looks like under the new circumstances. Your original retirement age may still be achievable. You may have the prospect of working a few additional years or adjusting your expected spending. The important thing is to make those decisions based on realistic projections rather than assumptions from your previous circumstances.

 

Understanding Social Security Options

Social Security can be an important component of retirement planning, particularly for someone whose earnings history differs significantly from their former spouse’s.

If your marriage lasted at least 10 years, you may qualify for divorce-spouse benefits based on your former spouse’s earnings record. These benefits generally do not reduce what your former spouse or their current spouse can receive.

This also applies if your former spouse passes away— there are divorced-survivor benefits that may be available to you.

Eligibility rules, claiming ages, and benefits calculations can differ, so evaluating your options with an advisor before making claim decisions can meaningfully impact your ability to understand their potential implications.

 

Rebuilding Savings and Prioritizing Goals

Divorce often requires balancing several competing financial priorities with fewer resources.

Start by rebuilding your budget. Figure out how much you can realistically save each month under the constraints of your new living expenses. Establish consistency in savings, even if it’s lower than before.

For parents, as we’ve discussed in this series before, this may also mean revisiting commitments to children’s education.

Housing deserves similar consideration. Purchasing a home after divorce can represent both financial independence and emotional stability. However, a mortgage that stretches your budget may interfere with your ability to save for retirement or address unexpected expenses. The right housing decision should be supported by your broader financial plan.

 

Protect What You’re Rebuilding

Review your life, disability, and health insurance needs. Coverage may still be intertwined with your former spouse, and benefits meant to support a shared household may no longer be appropriate.

Your estate plan deserves equal attention. Beneficiary designations, wills, powers of attorney, and health directives should all reflect your current circumstances. If you have minor children, guardianship arrangements and provisions governing inherited assets may be particularly important.

Be mindful of your divorce settlement when making these changes, as certain agreements and laws can affect what you’re permitted to change.

 

Moving Forward

A financial plan should help you distinguish between what requires attention now, what can wait, and where maintaining flexibility may be more valuable than committing to a particular outcome.

Build around what you want your new life to look like, and make sure your financial plan aligns with that vision.

 

 

 

Disclaimer: This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products or investments in general. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors. All investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable. Alhambra Investments, Black Arrow Capital, LLC and affiliated persons are not responsible for errors, inaccuracies, or omissions of information.