This article is from Tracy Stewart, a financial professional based in College Station specializing in collaborative divorce, and a Collaborative Law Institute of Texas board member, whose credentials include CPA/PFS/CFF, CFP and CDFA.
“I’ve never seen it all on one page before.” Those were the words of my client in his second collaborative divorce meeting. He was looking at the list of his property and debt that I had prepared. I was shocked. He was a bright, successful man.
It turns out that he was not alone. Too many collaborative divorce spouses have never seen the big picture of what they own and what they owe. In divorce, they have to come to grips with it. They are about to split it between themselves.
Furthermore, most of them also have no idea how much they have been spending on their lifestyles. Many don’t have any idea how long their savings and retirement would last. Some of them don’t care. They are confident that someone somehow will take care of them in the future. I am not as confident.
As they move toward retirement age, more and more Americans will be single in their retirement years. According to the Census Bureau, singlehood is growing. What these singles don’t realize is that the retirement cost of living for them is higher than for married couples the same age. One statistic indicates these costs at high as 40% to 50% higher for singles than couples. According to the Center for Retirement Research at Boston College, more than four of 10 Americans are “at risk” for not being able to maintain their lifestyle in retirement.
Empty-nest couples in collaborative divorces should ask their neutral financial professional to show them whether their retirement savings is likely to be able to support them in a satisfactory retirement. They have a real opportunity to get answers during the collaborative proceedings. They can request that the neutral financial professional compile and examine their living expenses and then pull together a post divorce budget for each of them. After all, this financial professional is going to be elbow deep in the couple’s financial information anyway.
In my professional experience, people who estimate their spending are low by 70% to 100%. That means their expenses are actually about twice what they believe it to be. That is scary. When they run out of money well into their retirement years, they will probably be too old be to desirable employees. Running out of money won’t be pretty.
The traditional divorce proceedings don’t include financial literacy lessons. In collaborative cases, it is an option. I encourage you to take advantage of it.