Your Freedom: The Other Side of Divorce
Divorce… it’s not all that bad. Just like most things in life, there are pros and cons to any situation. Going through your divorce does not mean you have to squander money, time and assets. In fact, there are several little known benefits that you can take advantage of during this process.
First off, let’s look at the kids.
Divorce can be especially grueling for children, but college financial aid is here to help. The Free Application for Federal Student Aid only requires financial information from the custodial parent (instead of both parents!). It’s important to make sure that any alimony and child support from the non-custodial parent is on the FAFSA.
In 2017, Fidelity Investments did an analysis that found women were less likely to fully invest in equities and therefore earned marginally better gains than their partners. Meaning that women could have better investment returns after divorcing. The fact that women have the opportunity to take over their retirement planning can be financially beneficial in the long run.
Well, not technically, but you can get money out of a retirement account early and not pay a withdrawal penalty. When an agreement known as a “Qualified Domestic Relations Order” is in the divorce, it allows for an early withdrawal from the account. This money is exempt from the typical 10 percent penalty assessed to those younger than age 59 (although income tax still needs to be paid if the money is not rolled into an IRA.)
Were you married for at least ten years? If so, you may be eligible to file for Social Security spousal benefits at retirement. This does not have an impact on the benefits your spouse will receive– in fact, they’ll have no idea you’ll be receiving these benefits. Go for it!
If you were 62 by Jan. 1, 2016, you can file a restricted application for Social Security spousal benefits once you hit full retirement age. (It’s different for married couples, but for divorcees you don’t have to wait until your ex starts Social Security.) The application will allow you to receive half of your spouse’s benefit while you defer your own and let it grow until age 70.
Lastly, downsizing is actually a beneficial process.
View it as a cleansing, a way to de-clutter and de-stress. This is an opportunity for a fresh start, to rethink priorities and make life less complicated. So what if you live in a smaller house, on a smaller budget! You have a whole new world of freedom. And even if you have a lower income after the divorce, making smart decisions can easily bring you back to building your wealth.