During their marriage, couples may well have discussed ideas for a joint retirement plan, perhaps agreeing at what age each will retire, and what they both want their life to be like in retirement.
Plans may have been put in place some time ago, including steps for financial planning, e.g. saving money to retire to live in the countryside etc.
Unfortunately, however, should the couple divorce, these plans will now be turned upside down. I work with clients of all different ages both breadwinners and home-makers. At whatever age a person is when they get divorced, they should not forget to consider their retirement plans, during the negotiations for their financial settlement. This is of course particularly relevant for those nearing retirement age. Statistics show us that there has been a significant increase in recent years of those divorcing over the age of 50 (nicknamed by the media as “silver splitters”).
Whatever your marital status and whatever age you are, it is important to consider putting some plans in place for your retirement.
Dominic Brockes is a chartered financial planner based in Surrey with over 20 years experience and I interviewed him recently about the importance of having a retirement plan. Here is what he had to say –
What exactly is a retirement plan? Is it just about paying in to a pension?
“No, not at all. Having a pension is one route to achieving your retirement goals. In my experience, clients with a solid retirement plan, have a range of assets to draw on in retirement. However a pension is often the mainstay of those plans.
Statistically we are living longer, you may have to fund a retirement period which is longer than your working life! The ability to achieve this does not happen by accident and you will need a plan with regular review points.”
Why is it important to have a plan?
“The key question here is “how do I wish to live in the future?”
It’s highly likely that you will want to either stop working or reduce your working time at some point. You will have ongoing expenses, these can be higher in early retirement as people have more free time for holidays and leisure. It is therefore paramount to have a saving/investment solution and to plan the best way to fund it so that it which will produce the income you need.
You may be entitled to a state pension. I always recommend that my clients complete a BR19 form, available on line, which sets out what you might expect at your state retirement age. Remember that this has been equalised for women and that many will now be over 65 before they are entitled to the state scheme.
A reliance solely on the state pension provision may leave many facing a reduced income in retirement and enforced changes to their lifestyle.”
How should someone approach creating a retirement plan?
“As Abraham Lincoln said “the best way to predict the future…is to create it!”
It’s important to assess your current income and expenditure to then bench mark it against what you think you will require in retirement. Assuming, as in most cases, your income from employment will drop or cease altogether. If there is a shortfall then this should be addressed.
A retirement plan can be straightforward. Try to articulate it in three or four bullet points. Have interim goals to achieve and “tick” these off or adjust them with your financial adviser as they are reached.
It is important to understand exactly what other assets you have and for example any tax implications of making withdrawals or using these as a source of income.”
Why is it important to think about your retirement plan when you are getting divorced?
“In my experience couples have planned retirement together with shared goals. Often, over the course of a relationship, one partner becomes the main bread winner and one is the homemaker. The result is that the bread winner may have built up significant assets, for example, a personal or work-related pension. This is often one of the ways which the couple’s retirement plans would have been achieved.
It is important that all the couple’s assets are taken into consideration and how these will affect the individual’s retirement plans. Pension rights are sometimes split on divorce and it is important that both parties take advice on the possible impact on their plans for retirement.
Provision can often be made to ensure that each parties’ individual goals can still be achieved.”
At what age should someone start thinking about creating a retirement plan?
Seriously, it’s a question I am often asked. It is worth noting that one is six people alive today will live to be 100!
It’s never too late to late to start thinking about enhancing your retirement provision. Doing nothing certainly isn’t the answer and remember whatever state provision you are entitled to it is unlikely to be enough to achieve the lifestyle you desire in retirement.
Saving via pension is very tax efficient. If you can afford to contribute it is certainly worthy of consideration regardless of your age.”
How can a chartered financial planner help you create your retirement plan?
“Having a great relationship with your financial adviser ensures a thorough review of your current circumstances and a clear understanding of your objectives. You can then work together to agree the way forward and via regular contact ensure that your plans are on track.
Pension legislation, regulation and tax law is constantly changing. Having access to high quality, face to face financial advice is vital. It ensures that you are kept up to date with any changes and how these may affect your situation.”
I’m a divorce consultant who provides support and guidance to people going through divorce. To find out more about how I could help you in your situation, get in touch with me here – Email Rhiannon
If you have found the tips in this blog useful then you will find lots more in my ebook “Tips for Coping with Divorce” which you can download here: free ebook.
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