Social Security Benefits and Divorce
Were you divorced with a marriage that lasted 10 years or longer? You could receive benefits on your ex-spouse's record (even if they have remarried). If you’re ready to retire, you need to make sure your retirement income will last many years into the future. Keep in mind, income must rise to meet rising expenses. We help divorced people with their retirement planning and Social Security benefits. You will want to get answers to the following questions:
- Could your finances be improved by another year or two spent in the workforce?
- Does an extended period of part-time work make sense for you?
- What decision should you make regarding Social Security?
- What benefits are you entitled to from your spouse?
- What will you do next, and have you already started doing it?
Making an Appropriate Retirement Timing Decision
For the most part, our clients like their jobs. A new retiree certainly deserves a few weeks of downtime. But after the initial rest, you will want to become productive. Many retirees make a mistake when they do not know what they are going to do without work. This is a good reason to keep working! You might want to travel, volunteer, explore new hobbies or take on a part-time job. You should have a plan for what your retirement will look like and what you want to do if you stop working. Start the post-retirement activity before you retire. You may want to experiment. Also, you have to know how much the retirement life will cost. Working on your garden is relatively inexpensive and so is charitable work, but traveling is expensive.
Will Your Retirement Income Meet Your Monthly Expenses?
You need to estimate your current monthly expenses (which are paid after taxes of course!) If you are going to travel, then add the cost of travel. Few of our clients will retire to a lower cost of living. Few of our clients report retiring and spending less than pre-retirement. In addition, expenses go up every year even if you maintain the same standard of living. You need an annual raise just to meet the rising cost of living. We will budget for ever-rising monthly expenses in retirement -- as your preretirement expenses increase.
Once you have a sense of your expenses, we need to estimate how much income you will have coming in from Social Security, pensions, and annual withdrawals from your investment accounts. The annual withdrawal that can be made from your investment accounts is dependent on future investment returns. Since the future has been, continues to be and will always be unknowable, we will have an extended conversation about a reasonable estimate of future investment returns. The reasonable estimate of future income will be driven by how much of your investment program is invested in stocks of well-managed, well-capitalized businesses. Our financial advisors for divorcees will then be able to make an estimate of your future income. If your income does not cover your monthly expenses (with a little cushion), then you are not retiring. The biggest mistake we can see is retirement with a shortage of income. If you can live and prosper on the income, then you could think about retiring now.
Have You Stress-Tested Your Retirement Finances?
Successful retirement planning involves planning for unexpected expenses. One client told us that “Financial emergencies happen every six months, but you can schedule them.” So, they keep a meaningful amount in cash reserves, maybe municipal bonds, for these emergencies.
As financial advisors, we understand that markets fluctuate. So, we work out a plan for you to prosper in retirement even if financial matters do not as smoothly as you’d like. A significant decline in your investments is a routine event. We help you have a plan in place to address market downturns. In addition, skilled nursing care or an assisted living stay can cost thousands more per month. Be prepared with an emergency fund to help cover these costs in retirement.
The best time to plan for your retirement is before you retire. You have to plan your finances and your time. Retirement income planning is what we do for a living. Your prosperity is our business.
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Contact if you have questions about pre-retirement investment advising services. We proudly serve clients in Ridgewood, Bergen County, and throughout the greater Northern NJ area.