When divorce changes your status to single, it’s important to take a look at your finances and adjust your retirement planning strategy to match.
Divorce can wreak havoc on your financial status as well as your plans for the future. This means that your retirement planning will need some tweaking after your divorce is finalized. You may have previously been planning on sharing your retirement years with your ex and working together to save up money for a joint retirement. Now, you will have a revised budget based on your single income as well as a revised retirement goal. There is no better time than today to get started with making a new retirement plan for your individual future.
Review Your Budget
The first step to take when updating your retirement plan is to figure out how much money you will need to save and how much money you have available to save. First, update your budget based on your single lifestyle and new living accommodations. You may find that your expenses are dramatically lower than what they were when you were married, but your total household income likely will be lower too. Do not forget to factor in alimony or child support and new health insurance information into your budget. You can use your current budget to determine how much money you have available to save each month.
Use a Retirement Calculator
In some divorces, the amount of your retirement and non-retirement assets are divided among both spouses, so you may need to review your account balance to determine your total assets. Then, use a retirement calculator to project how much money you need to save to reach your retirement goal at a certain age. Ideally, you will have enough money in your budget to accommodate your projected retirement date, but if not, you may need to make changes to your budget or to your retirement date.
Automate Your Savings
Once you have finalized your retirement plan and have determined how much money you will save for retirement each month, you can then automate the savings. For example, you can set up an automatic draft into your retirement account, stock account or savings account. In many cases, you will want to diversify your holdings, so you may set up automated drafts into each of these or other types of accounts.
Retirement planning can seem intimidating when you are thinking about it on your own for the first time, but planning for the future can take away some of the stress and apprehension associated with it away. These tips can help you to better prepare for whatever the future may bring.