13 Nov 2020
Divorce can be a very stressful time in any person’s life, especially financially. When we think of divorce, we think settlement agreements, division of assets and child support, for example, but do we even consider retirement assets and the impact on retirement for the future?
According to UK law, pensions are considered part of marital assets and thus can be divided between spouses. This includes workplace and personal pensions.
This can cause a major drop in retirement income and could irrevocably set back your retirement planning.
“The financial impact of divorce can be devastating both in the short and longer-term, lasting well into retirement as divorcees experience expected retirement incomes of as much as 16% lower than those who’ve never divorced.” – Clare Moffat, pensions specialist
• You might have to delay retirement indefinitely
• You might have to carry on working to support yourself
• You might have to get a part time job to supplement your income
• You might have to move to a country that has a lower cost of living to stretch your budget
• You might have to downgrade your lifestyle to match your new retirement income
These are all very disturbing realities to be faced with when you have been saving your whole life for the golden years.
What can be done to salvage your retirement funds?
• Firstly, and most importantly, seek the advice of your financial adviser to assess your retirement situation.
• Calculate your predicted retirement expenses in the future and determine the shortfall.
• Funnel any extra cash you have into your retirement contributions to try and make up the shortfall
• You might consider increasing your work pension contributions. (in some cases, your employer matches your contributions which is a great way to increase your pension even more)
• Try to cut down on expenses or downgrade your lifestyle slightly. Do you need Starbucks coffee every day? Do you need 5 designer handbags? Do you need to eat out every week? It’s easier to downgrade slightly now, so when you hit retirement the change is not so great.
• We are not talking about cutting out all luxuries and vacations and shopping. We are suggesting getting into a habit of budgeting for these things.
Your deVere adviser will be able to help with your new divorcee budget and set plans in place to cover the loss in future retirement income. [email protected]
Please note, the above is for education purposes only and does not constitute advice. You should always contact your deVere adviser for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above