Divorce is emotionally draining and nervous, and it also cuts in your pocket a deep hole. Divorce is very costly, from paying the lawyer to losing your spouse’s earnings. You are depriving yourself of the retirement savings and assets that you carefully built up with hard work over the years. The divorce proceedings are also causing you emotional turmoil. It’s really difficult to recover from such issues but there are also positive sides. While that is no reason to commence divorce proceedings, some financial rewards can accrue. This article has been written and compiled to give you a better insight and perspective to the scenario.
Easier budgeting with better monetary control
A divorce ensures zero fights over money. Conflicts over funds allotment, budget issues, and expenditure controls will vanish overnight. Also, divorce does bring freedom the way you always desired. If positives accrue for you, it doesn’t imply that the same benefits go to your spouse.
You access retirement funds earlier
A divorce is among those times when you can access your retirement money and ward off early withdrawal penalty. When a QDRO (qualified domestic relations order) is signed during the divorce, you can withdraw money from your retirement account earlier than usual. This withdrawal exempts the 10% fine applicable to those persons below the age of 59 but still pay income tax if IRA does not hold up your money.
Cashing out from your retirement account is risky but there are options available for those affected by divorce proceedings. You have a much better cash flow position. When divorce proceedings are amicable, people divide the retirement fund balance in the absence of a QDRO. But that may be a costly mistake for you. Before making up your mind, consult both your attorney and financial planning advisor.
Kids, too, benefit financially
Divorce can affect a kid’s mind and makes life very difficult for them. But, a divorce can enable starting much-needed college financial aid. These applications require only basic financial detail of the parent maintaining custody of their child. But child support and alimony delivered by the parent who does not have custody has to be declared on the FAFSA.
Social security benefits for aged divorcees
As a divorced individual, you may file for Social Security spousal benefits at the time of retirement. But you can lay hands on benefits if married for a minimum period of 10 years. Young people have no entitlement to the funds and older divorcees can secure half of their former spouse’s financial benefits; They can do it while delaying their own and permitting funds to accumulate till they reach 70. For married people, this can be only implemented if the individual’s spouse was the one who initiated their own benefits. But wait, these rules don’t apply to all divorcees. After finally securing a divorce, do not wait around until your ex can access social security benefits independently. You have no such obligation.
A divorce doesn’t imply that you lose your money. A divorced person can restructure the assets and wealth with lower income but with a smarter use of available resources. A divorce may not improve everyone’s financial condition, but many do derive benefits. Though quite surprising for some, the reality remains the same with some positive aspects of a divorce. Especially from the financial angle. But it is something you can not rush.