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Divorce isn't easy.
Getting divorced isn't easy, emotionally or financially.
While it's possible to recover from the damage of your savings, accounts, and more being split in half, it can be hard to do. Financial planner Ylisa Sanford, Ameriprise private wealth adviser and financial planner, says there are several things you should know before divorcing, from the fact that it costs a lot to turn one household into two, to the fact that your 401(k) could be divided in half.
1. It could really hurt your retirement savings
Retirement savings and divorce simply don't mix.
"The most financially disastrous part of divorce is that you're taking a unit that has two incomes with one residence and one retirement goal, and you're splitting it," Sanford says. In some states, divorce can result in shared assets like retirement accounts being divided in half.
As Dave Johnson writes for Business Insider, "Dividing my 401(k) and other investments in half, what remains in my bank account is far less impressive and will run out distressingly fast when I need to start drawing on it in retirement. Divorce has moved a worry-free retirement well out of reach."
2. You'll probably need to move or downsize - and that's not cheap
"Unless people are willing to downsize, it can be disastrous," Sanford says. "You're now trying to support two distinct and separate households with the same amount of money."
That transition, though, can cost a significant amount on its own. Jorden Barcus writes for Business Insider that it cost her about $3,400 to move out on her home in Atlanta during her divorce process. "Rent was $990 a month, and the apartment required a down payment equal to a month of rent to move in. Since I had no savings, I had to pay in multiple installments," she wrote.
No matter what, divorce will likely involve one person moving. "If one party doesn't have the resources to support that, it can be detrimental," Sanford says.
3. It will be easier if you have a prenuptial agreement
If you have a prenuptial agreement, the process of your divorce might be a bit clearer. "Prenups make things very easy from the financial aspect, if there is a dissolution," says Sanford.
While it's not possible to turn back time and make one, couples who have one will probably be glad they do. In Sanford's opinion, having a prenup is somewhat like having insurance: It's not something you plan to use, but it is there if you need it.
4. A good financial planner will be indispensable throughout the process
Finding a financial planner you work well with is a critical part of the divorce process. "I really suggest people start out with just analyzing where they are and where they want to be. Then, work with someone who can act as a fiduciary and really provide objective financial planning advice," Sanford says.
"Find someone you can collaborate with and can have a very candid relationship with," she continues. Finding someone who understands what you're dealing with and can help you with financial decisions can be a big help.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
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