by Robert J. Rall, Certified Financial Planner, Rall Capital Management
We all go through transitions during our lifetime. We graduate from school, get that first job, get married, have children, change careers, care for an aging parent, and the list goes on and on. Each transition we go through has different emotional characteristics. Some are happy, some are sad, some are exciting, and some are scary. But they all have at least one thing in common…they all have a financial component which requires us to make a variety of financial decisions.
We make better financial decisions when we are prepared for them. Putting a financial plan in place can help us be better prepared. But what about those life transitions that don’t provide us with an opportunity to prepare? A couple of common examples are the sudden death of a spouse/partner, or an unexpected divorce. What then? This article will help provide some ideas on where to start if you find yourself going through one of life’s toughest transitions…being Suddenly Single.
While obviously very different in many ways, the steps to take from a financial perspective are pretty similar in both divorce and the loss of a spouse.
Begin by getting organized. Gather information relating to income, expenses, assets, liabilities and insurance policies. If employee benefits are available, don’t forget to get that information as well. It can help to set up a file system for bank statements, bills, credit card statements, investment accounts, income taxes, estate documents and other miscellaneous documents. It’s also helpful to create a calendar with important due dates and to keep a log of actions you have taken to help you keep track of everything you have done.
Review your cash flow and liquidity needs. Make sure that you have sufficient cash flow to get through this transition period. It can help to prepare a list of where your money will come from and where it needs to go in the months ahead. This can also help you with the preparation of a longer term budget.
Collect any benefits that are due to you. Whether divorced or widowed, you should contact the nearest Social Security office to determine what benefits are available to you. If you are widowed, you may be eligible for life insurance proceeds and/or veteran’s benefits. You may also want to roll over a deceased spouse’s IRA or 401k into your own. If divorced, you may be eligible to receive a portion of the retirement account, depending on the details of your settlement.
Make sure you have your own health insurance in place. If you are already on Medicare, you just need to notify them. But if your spouse was still working, and you were covered under his/her policy at work, ask about continuing the policy under COBRA until you have time to investigate the choices available to you. If divorced, will your ex-spouse’s health insurance plan cover the children post-divorce? Will it cover you for a period of time? These are questions that need answers.
Contact your professional advisors. Your attorney, tax preparer, investment advisor and insurance agent can be very helpful during this difficult time. Your attorney can help guide you through the estate process if your partner has passed. You will probably need to retitle some assets and may have to update your own estate documents (wills, power of attorney, etc.). Your tax preparer can help you determine the best way to handle your change in filing status. Your investment advisor will probably need to update beneficiary arrangements on any IRA accounts and retitle joint accounts. Your insurance agent can help with any claims that need processed, and you will also need to update your property and casualty insurance policies (auto, homeowners, etc.).
All of these are good ideas, but it is most important to take care of you. Divorced or widowed, this is a very emotional period. Remember your self-care. Exercise, proper diet and a bit of personal indulgence is important to keep your balance.
Finally, remember that you don’t need to rush anything. Try to postpone any major decisions during the first year of your new life. Well-meaning friends, family and salespeople will bombard you with suggestions. You are at a vulnerable time in your life. Go slow. Give yourself time to heal and adjust to being Suddenly Single.
Want to know more?
Dr. Kathleen Rehl, Ph.D., CFP®, author of “Moving Forward On Your Own—A Financial Guidebook for Widows,” will be hosting the workshop on January 23 at Advent Lutheran Church, 7550 N. Wickham Rd from 9 a.m. – 12 p.m.