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Saving for Retirement after Divorce - Mahlen Financial

Written by Amy Mahlen | June 01, 2022

In working with clients throughout Colorado, many divorced women do not save much for retirement. This is especially true if 100% of their income is coming from maintenance payments. It’s important to consider how to prioritize saving for retirement despite competing priorities in your budget. In this post, you can learn why this happens and what you can do about saving for retirement after your divorce.

Gender Income Gap

One challenging aspect of saving for retirement for women is in a large part due to gender income gap issues. Traditional dynamics contribute to this reality, including lower pay for women, women having less financial knowledge, women needing more time away from work caring for family, divorced women financially providing for family, not receiving court awards or agreed upon shared expenses for children, and more. There are simply not enough finances to properly prioritize saving for retirement. It is extremely important to be aware of this challenge when 1.) negotiating asset division during your divorce and 2.) creating a future savings plan even if it means starting small. Putting off addressing this reality could mean working many more years than you would like or other undesirable outcomes. When you come up with a plan to save incrementally, your retirement savings can quickly add up.

Prioritizing Children and Family

If you are divorced and also a mother, your financial obligations to them may impact your ability to save for retirement. You may be overly taking care of your children and family’s financial needs to your own detriment. Some parties don’t help financially, even if they are under court order or if they do, do not comply fully with financial agreements, or don’t reimburse costs on time or at all. They may not agree that the child should receive medical care, go to day camp, play hockey, get a tutor, or attend counseling, for example. In which case, in a joint decision-making scenario, if the other party wants the child to participate in these activities, the financial responsibility falls on that party (often the mother).

Getting retirement assets in your divorce

For retirement planning, it’s critical to receive an equal portion of retirement assets in your divorce, even if you feel that getting the home or other cash options are better for you in the short term. You should push to receive at least 50% of the retirement assets in your divorce to lessen future savings needs that will be required. Even if you feel other assets are a priority at the moment, consider the long-term. Of course, it is difficult to save and when you’re in the thick of it, it is hard to see how important this is. Work with a financial specialist to model and project whether 50% of the retirement assets in your divorce can grow and mature into enough money for retirement, or if you may have to consider returning to work to supplement your income.

When you consider your entire savings plan, take your own long-term needs into account alongside those of your children and family. Work with a financial expert to design a retirement savings strategy and budget that works for your unique situation. If you prioritize this now, know that there are substantial compounding effects over time. Contact Amy Mahlen of A.M. Financial to learn more about how we can help.