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Know "Your Numbers" When Considering Divorce
What's so important about a number? We're surrounded by irrelevant numbers every day, but your number is different. Your number is important; it's the amount of money you'll need to maintain your lifestyle once you're divorced. When preparing for divorce, too many women calculate the amount of money they need to maintain their lifestyle simply by looking at their current expenses. What they overlook are the important products and services they should have now and what those items cost. To be financially independent, you should know what it will cost to educate your children and plan for your own retirement. A Financial Advisor can accurately calculate the future costs of your children's educations and your retirement and determine the type of savings plan you'll need to cover the costs of these goals. These costs should be included in your current budget as they will help you maintain your lifestyle in the future. In order to negotiate the best outcome in your divorce, use a Financial Advisor so you know "your numbers".
I'm familiar with the following scenario: A newly divorced working woman suffered a severe back injury in a car accident and went on a six month disability leave. Her company paid her $4,000 each month in disability benefits, but after tax, this amount wasn't enough to cover her expenses. After just six months she had spent $50,000 of her savings. If this woman had listened to her Financial Advisor, who had recommended additional disability insurance coverage, her hard earned assets wouldn't have been depleted.
Other types of insurance you must understand are your health and dental coverage. Often the cost of health and dental insurance for a working woman is shared with her employer. But if you're not working, and are covered by your spouse's health plan, you won't have insurance coverage once you're divorced. The government's Cobra rules do allow you to be covered for no more than three years but you will need to pay the premiums. However, Cobra coverage is often costly so it's in your best interest to have a Financial Advisor help you compare the cost of health plans. This way you will have the information to negotiate for the right type and amount of coverage in your divorce settlement.
Medical and dental insurance, life insurance, disability insurance, long term care, and property and casualty insurance should all be considered by every adult. Your Financial Advisor can help you determine what types of insurance are appropriate for you. The Advisor will be able to educate you on the products and evaluate the options and costs associated with each. You will have a lot to consider, but the effort will protect you and your family against uncertain risks in the future.
Just as important to your family is the cost of your children's education. Have you accurately calculated how much it will cost to educate your children at the schools you would chose for them? With education costs for colleges and universities rising by 4-6% per year, which schools will you be able to afford? Work with a Financial Advisor who can analyze the total cost of education, including the effect of inflation, on college tuition. They can also calculate how much you need to save each year and how to invest your money to help you meet your education goals. Keep in mind that the cost for two young children to attend private colleges in 15 years could reach $1million. Underestimating education costs in your budget may leave you with a disappointed child.
Recently a new client asked me to help her determine if she had enough saved for retirement. She feared she'd become a "bag lady" and run out of money. She was subsidizing her elderly parents' expenses, but she didn't want to be financially dependent on her two children. I completed a retirement analysis to address her concerns. The analysis accounted for her expected income and expenses during retirement, including income from social security, her pension, investments and a small inheritance. The investments were analyzed using conservative rates of growth and the expected retirement income was adjusted for inflation and taxes. Through a change in the asset allocation of her investments, her portfolio was structured to provide the cash flow she needed to maintain her lifestyle while insuring a lifetime income. We were able to give her a lifetime income through the purchase of an annuity and to protect her retirement income by adding long term care insurance.
Whether your retirement objective is to live well or leave a legacy to your family or charity, you need a strategic retirement plan. In order to determine if you'll have the retirement income you'll need, and protection from the risks which can eat away at your hard earned assets, retirement analysis should be completed. A Financial Advisor will help you assess if your lifestyle can be maintained through your 70s, 80s and beyond.
In some cases, an Advisor may be utilized as an expert witness. In order to substantiate the results from education or retirement analysis, an Advisor can explain the results to attorneys or during a trial. Whether the objective is to purchase insurance, pay for your children's education or your own retirement, an advisor can provide the facts which may help you negotiate for the necessary assets in your divorce.
Know "your numbers". Speaking with a Financial Advisor can provide you with the information you need today to prepare for a better tomorrow.
If the divorce is being filed under one of the seven fault grounds (including extreme cruelty, adultery, abandonment, substance or alcohol addiction, institutionalization, deviant sexual conduct and incarceration), the 18 month separation period, required for a no-fault divorce, is waived. However, each ground for divorce has its own stipulations.
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