What happens when you move from the “two of you” plan to the “you” plan in retirement? With grey-haired divorce on the rise or the unexpected terminal illness, being single in retirement is a real possibility. How do you come up with a new game plan?
What to do if your loved one dies
Go slow. You're emotional, vulnerable. Don't make rash decisions. “Try to avoid making any long-lasting decisions (like whether to relocate, remarry, sell a house) for at least six months. Give your heart time to heal and your head time to process your new life situation before determining your major next steps,” says Kelley Long, a CPA with KCL Financial Coaching.
But that said, there's plenty to be done. You will want to contact an attorney to probate your deceased spouse's estate. Review wills and trusts to determine if you are to receive assets outright or in trust. Meet with your accountant to determine if you need to revise estimated tax payments because you are suddenly single, and, you won't be filing a joint income tax return going forward.
If your spouse was collecting a pension or non qualified retirement plan benefit, contact the program administrator to determine what your rights are under the plan. In other words, do payments continue if it was an annuity, do payments change because the spouse elected a joint survivor benefit (which may result in only collecting half of the pension now that the spouse is deceased), or if the spouse elected a single life annuity, it may end, says Jonathan Gassman, a certified financial planner and partner with Gassman & Golodny.
Contact your health insurance carrier to see if there will be any changes in coverage and contact your life insurance company if there are any death proceeds.
Start rethinking your life. Put together a new budget, review your long term care insurance. Figure out where cash flow will come from to last a life time. Can you maintain your home or will you be better off renting? Revise your current will to reflect that you are now single, revise your power of attorney and health care proxy to give someone else the responsibility.
What to do if you get a divorce
With the majority of their earning years behind them, couples that divorce later in life need to pay especially close attention to the division of assets, and the valuation of their investments. How does the property get divided, if you have debts, how are they divided, especially during retirement?
“If you haven't worked outside the home, consult with your attorney to ensure that your divorce agreement spells out your share of your partner's retirement funds and how you will collect it. You may be entitled to receive your spouse's Social Security insurance benefits,” says Kimberly Foss, founder of Empyrion Wealth Management.
With the complex regulations and laws governing financial assets and retirement plans, it is very important that a couple include financial advisors and divorce attorneys in their decision making process, says family law attorney Barry Finkel. Retirement plans have their own rules, so qualified domestic relations orders should be as specific as possible about survivor benefits and asset distributions. QDROs can be extremely tricky so it is essential that the couple has a team that understands both the legal and financial implications of divorcing older couples.
Also high on your to-do list is getting your legal documents in order. Make adjustments to your will, beneficiary designations, living wills and anything else that might have your spouse's name, especially joint banking accounts and credit cards.
A big issue in divorce is the house. Understand the mortgage options and determine whether it should be in your name only and whether you should refinance. Think hard too, about whether you want to keep the house. “What is it about the house that you like. Is it the marriage museum? Is it the safe neighborhood? Once you have that nailed, consider other, more affordable housing that fills or nearly fills those needs,” says Tracy Stewart, a CPA specializing in divorce.
Do not assume that you want to be invested in the same investments that the two of you had. Your tolerance for investment risk is probably going to be different in your new singlehood than it was when you were half a couple, she adds.
Rethink healthcare needs. You will no longer have a partner to take care of you. “If you're retired, consider whether you want to go back to work, not only for the income, but the benefits,” says Rosemary Frank, a certified divorce financial expert.
Whether death or divorce has you now flying solo, develop a “life plan” for you that integrates short-term and long-term dreams and goals. And though you are alone, you don't have to go it alone. Get good help and take good care of yourself.