How Divorce Decimates Your Finances
Divorce can be a tremendously difficult time for people. First the emotional disruption and despair that can occur as a result of lives previously knit together, tearing into two very separate entities. Secondly, there is the devastating financial impact that the separation of finances and the expense involved with a legal divorce can create. In the midst of the turmoil, many couples fail to recognize the long-lasting impact a divorce can have on their finances. In the U.S. this is an ever increasing financial problem, with more than 40-50% of marriage ending in divorce. In fact, I would go as far to say that divorce is one of the greatest factors that is contributing to number of people who are seriously ill-prepared for retirement. According to a 2012 General Accountability Office report, divorce will drop the household income for the average woman by as much as 41% and for the average man it will drop by at least 20%. Before someone jumps on the emotional rollercoaster that leads to divorce, it’s important to examine all the lifestyle factors that will be impacted by such a major decision.
Divorce Can Result In Costly Legal Counsel
The cost of a divorce can vary significantly depending on the amount the couple has in assets, how many minor children they have, whether or not they are in the middle of a custody battle, and whether there are other factors such as a family business and or retirement accounts to contend with. The more complex a situation, the greater the financial outlay for the couple. The first and most obvious cost a couple faces is the expense of paying for a lawyer. In a non-contended divorce, where each party has separate legal counsel will typically cost each person as little as $5,000. However, if there is a minor child whose custody is in question, each person can expect their legal fees to go up to as high as $10,000. To even further complicate the situation, if the couple is in a shared business, the cost of separating the business finances will be as much as $20,000 per person.
The Cost Of Divvying Up Finances In A Divorce
Once the major emotional factors such as child custody and child support are settled, there is then the cost of the separation of other assets. This can also incur major cost as many specialists may be called in to determine the “fairness” of the divorce. Assets such as the house, retirement plans, settling taxes, determining eligibility for alimony, the list goes on; all contribute to significant financial outlay both during and after the divorce.
Divorce And Cost Of Living Post-Divorce
Once the financial issues are resolved in a divorce and the associated legal fees have been paid, the next step is forging a life without your life partner financially. For many this involves two separate residences on often less than half the income. This can tremendously impact standard of living and can put the individual into serious debt as he or she tries to get back on their feet. Additionally, the impact of a divorce on a 401(k) or 403(b) retirement plan, can be very hard on most retirement savings plans. For many, divorce is a major reason why they are ill-prepared for retirement.
This article just barely touches the surface of the many financial implications that a divorce can create on a couple’s finances. However, before a couple decides to make the decision to separate a final decision, it’s important to examine the deep reaching financial implications of such a big decision. For more information on how a divorce will impact your finances, or to try and recover financially after a difficult divorce situation, speak to a Redhawk Wealth Advisor near you today.