What Women Need To Know About Financial Planning And Divorce

March 31, 2021

By Kim Segal, CFP®

Divorce is not easy for anyone, but women are particularly vulnerable to financial hardship after a divorce. The reasons why divorce affects women differently abound, but financially, women are typically in a different position than their spouses. Women typically make less than their male counterparts for starters, meaning they stand to lose over 50% of their household income after a divorce between a heterosexual couple.(1) Secondly, women typically work fewer years on the whole compared to their male equivalents because caregiving responsibilities fall mostly on their shoulders.(2)

This means that women tend to go through a divorce being more financially disadvantaged than their male counterparts because there is an income discrepancy in most heterosexual relationships. Luckily, at Catalyst Investment Management, we have plenty of methods that we employ to make sure women are taken care of during this stressful time. Here are just a few ideas that typically help our clients navigate through the murky waters of divorce.

Having experienced my own divorce, I can relate to the emotional, family and financial impacts that result from divorce, even if it is amicable.

Make A New Budget

Men outearn women in 77.8% of heterosexual relationships, while women are still the primary caregiver of the children in most marriages. However, even if you both contributed equally to your financial situation and child-rearing duties, your financial situation is going to look different after the divorce.

That’s why it is fundamental to create a new financial plan that takes into account your priorities and budgetary concerns. If you receive the primary home in a divorce, while also getting full or partial custody of the children, you need to create a budget that takes into consideration the ongoing costs related to child-rearing and house maintenance, for example.

Create A New Financial Plan

Your previous wealth strategy took into account a different future and different financial outlook. It is time to create a new wealth creation and management strategy that takes into consideration your current financial outlook. This can be challenging, but you do not need to worry. Financial advisors have plenty of experience creating new wealth management plans post-divorce that take into consideration the differing financial needs of women, who are likely going to live longer and therefore have more retirement years to adjust for. We can recommend new strategies that will help you maintain your lifestyle well into retirement.

A Potential Blind Spot

One asset often overlooked in divorce financial negotiations is employer compensation in the form of stock options and restricted stock . If your spouse has received this type of compensation, you need to have a financial planner analyze the situation. Even if these assets don’t have a current value, they may prove to be quite lucrative given their long-term nature. Ignoring your spouse’s employee stock compensation could cost you a substantial sum of money. Your spouse earned this compensation during your marriage. You should be able to enjoy the fruits of this labor.

Do Not Forget About Retirement Assets

When you are in the thick of negotiating a divorce with your spouse, there may be a ton of contentious issues to work through. Questions surrounding child support, custody, and alimony payments may be at the top of the list, but do not forget to discuss a fair division of your retirement assets. Also, keep in mind that what is fair may not be a 50-50 division of the assets.

This is because women live longer than men and have more catching up to do with their retirement investments than men do. Women make less than their male counterparts and spend fewer years in the workforce because of child-rearing responsibilities. All of these factors combined put women––especially divorced women––in a disadvantaged situation when it comes to retirement planning.

Getting A Divorce?

Very few people get married thinking that the marriage will end in a divorce; however, it is a very common hurdle in life, with between 40% to 50% of marriages ending in divorce.(3) It is a good idea to speak with a financial advisor as you negotiate the terms of the divorce to ensure that you will have the proper wealth management strategy throughout your life. You can schedule a call by reaching out to us at (617) 610-0587 or emailing info@cim.financial.

(1) https://www.bls.gov/opub/reports/womens-databook/2016/home.htm
(2) https://www.pewresearch.org/fact-tank/2015/10/01/women-more-than-men-adjust-their-careers-for-family-life/
(3) https://www.apa.org/topics/divorce

About Kim

Kim Segal is co-owner and CERTIFIED FINANCIAL PLANNER™ (CFP®) at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. With over 20 years of experience, Kim is passionate about developing long-term relationships with her clients so she can provide them with customized solutions that make the most impact on their lives. Kim specializes in serving business owners, pre-retirees and post-retirees who desire a road map to their ideal retirement and women who are recently divorced or in the process of getting a divorce. Every client of Kim’s receives her utmost dedication and attention as they work toward their goals. She graduated from Boston University with a bachelor’s degree in business administration and spent much of her career prior to CIM at Charles Schwab, where she held various roles, including financial planner, vice president, and financial consultant. Outside of work, Kim loves spending time with her two teenage children, cooking, and staying active by running and skiing. Learn more about Kim by connecting with her on LinkedIn.

Leave a Comment

Your email address will not be published.