Divorce, women and wealth: 3 steps to safeguard your financial future

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A decision has been made. It’s the word all married couples dread — divorce.

For women, few issues are more critical to surviving divorce than establishing financial security. The majority of female newlyweds believe divorce will never happen to them, but when it does, many are unprepared for the financial fallout and hard-hitting lifestyle adjustments to home, child care, vehicle, retirement funds, even spending money. But by making smart and prudent financial decisions now, women can prevent some of the financial sting of divorce — a pain that permeates lives long after emotions and families begin to heal.

Unfortunately, 41 percent to 50 percent of U.S. marriages will end in divorce. This sobering statistic causes serious dissolution of wealth, especially among couples aged 25 to 39, which account for 60 percent of all divorces as they lead up to their peak earning years.

Even boomers and empty-nesters are increasingly finding themselves at risk for separation. “Among older women, those who are divorced have dramatically lower incomes and higher poverty rates than widows and most other Social Security beneficiaries,” according to the Social Security Administration.

The negative impact of divorce on people’s financial futures is pervasive, especially for those who served as the main family caretaker or stay-at-home mom. The same is true for men when women are the major breadwinners: divorce can hit twice as hard if their earning capacity was negatively impacted by the choice to off-ramp or modify their career paths for the betterment of their family. At the settlement table, emotions can hijack clear thinking and feelings of fear, anger and resentment can prevent good decision-making about finances. What’s more, demographics show women tend to outlive men in the U.S. by almost seven years, making the future financial impact risk that accompanies divorce that much greater.

No one wants to enter marriage with a list of “What ifs,” but families routinely plan for negative events like death, disability and a host of other potentially damaging financial occurrences. With so much at stake, how can women safely survive the uncoupling of property, assets and relationships?

Here are some steps women can take to secure their financial futures:

  1. Take an active role in your marriage finances. Don’t become a bystander simply because it’s easier or less time-consuming to be fully engaged. Be present, be a partner, and contribute to financial conversations and decisions between you and your spouse. Know what you own. Know what you owe. Know what you spend. Be able to answer why to all these questions. The more informed women are about their marital finances, the better prepared they will be if life suddenly changes. Waiting until after a divorce, disability or death occurs is the worst time to educate yourself. Being informed before a negative event will help to alleviate the time, stress and expense of piecing together a financial plan at the most inopportune time.
  2. Partner early in life, not just early in your marriage. Surround yourself with trusted professional advisers and partners. This includes, but is not limited to, your wealth adviser, attorney, accountant, physician, clergy and counselor. The list of those you lean on to help move your life forward may be a long one, but every player is important. Look beyond inexpensive digital solutions, and choose real people with the credentials and expertise to guide you through the most important decisions in your life. These are people with whom you form relationships and from whom you gather strength and protection —professionals who act as your confidants in good times and in bad. It takes years to develop and foster these relationships, so put your team together long before tragedy strikes.
  3. Collaboration is always a preferred option to protect and preserve your financial assets and can go a long way toward healing broken relationships. When children are involved, collaboration becomes even more critical. Hiring a financial neutral such as a collaboratively trained certified divorce financial analyst or CPA to help the respective legal advocates adds valuable perspective to the financial conversation. A financial neutral keeps long-term life goals in view and separates emotion from financial facts. Every decision to fight, litigate and refuse to cooperate carries a lifetime of financial impact and every dollar spent on attorney fees is one less dollar to save toward your children’s college fund, invest in your own new career or purchase a new home.

There’s a cost to divorce beyond the emotional toll and women bear the biggest burden when a marriage ends, losing 41 percent on average of their household income. In the beginning, no one dreams of a marriage that ends. No one enters marriage expecting to become a widow, and no one plans to be impacted by a disability. But by following these three simple steps, you can safeguard your financial future no matter what challenges life brings.

At a glance: Kim Lee Kenawell-Hoffecker

Kim Lee Kenawell-Hoffecker, is a founding partner and senior family wealth adviser at Avantra Family Wealth, headquartered in Mechanicsburg. With nearly 25 years of experience in financial services, Kenawell-Hoffecker works closely with clients to help them achieve their life goals. She is a certified divorce financial analyst and a volunteer firefighter/EMT, as well as an executive member and senior peer for the South Central PA Critical Incident Stress Management Team. Kim can be reached at Kim_Kenawell@avantrafamilywealth.com.

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