Atlanta Financial Blog

Retiring Early Despite Unexpected Divorce

Cathy C. Miller, MBA, CFP®, CRPS®, CDFA™
September 11, 2018

The incidence of “gray divorces,” when couples over 50 years of age decide to go their separate ways, has doubled in the last 25 years. During that same period, divorce among partners who are 65 or older tripled. Growing old together may be overstated.

When an existing client referred a friend of hers to us, that overstatement came to life for me. Our new client reported in from “Ground Zero” – she was going through an unexpected gray divorce. Struggling with health issues caused by work-related stress, she wasn’t sure how long she would be able to work to “make up” for the financial assets that were about to be lost in the divorce. In addition, she had a home overseas she wasn’t sure she would be able to afford after the split. Most importantly, she was concerned about how her impending divorce would impact the timing of her retirement. Her health depended on minimizing work-related stress as soon as possible.

Working with her attorney, we provided advice on the financial impact of several settlement approaches. For example, in her case, splitting her pension income versus creating an equitable settlement by combining other assets, such as her taxable and qualified retirement plan, was an option to consider.

With our help, she was able to reach an agreement through mediation, minimizing her legal expenses. The final agreement balanced her tax concerns against those of her soon-to-be ex-husband. She would use her retained Health Savings Account (HAS) to cover her ongoing medical bills. We helped her develop a spending plan that would meet her needs, with accelerated savings going into her retirement plan and HSA. In addition, we talked her through her housing issues and guided her through the process of obtaining financing when she downsized. Finally, we helped her sell her second home overseas. The proceeds of that sale replenished her depleted savings and helped her meet her goal of an early retirement. Because of her ongoing health issues, the timing of her retirement was critical. Being able to retire, on her timetable and with financial confidence, eliminated the ongoing impact of work-related stress on her health.

Divorce is never easy, even when it’s amicable. Having an integrated financial and legal team for counsel, can help pave the way for equitable settlements that set up both partners for success separately.

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