Page Contents

1. Immediate Financial Steps to Take After Your Divorce
2. Planning for Social Security
3. Navigating Health Insurance
4. Do You Need Life Insurance?
5. Planning for Long-Term Health Care
6. Updating Your Estate Plan
7. Tax Planning Post-Divorce
8. Choosing the Right Investment Strategy 
   
   

Immediate Financial Steps to Take After Your Divorce

Featured Resource: Download our FREE Post-Divorce Checklist

You have just signed your final divorce decree, memorializing an end to what was likely a long and emotionally draining process. However, the work is not yet complete. There are crucial practical matters to address immediately. Here are 17 essential steps to take after your divorce is finalized, ensuring a smooth transition to your financial and personal independence.

1. Close all joint cards, bank accounts, and financial accounts.
2. Remove your former spouse’s access to all existing individually owned accounts.
3. Consider data security. Change passwords and logins for existing financial accounts.
4. Review property and casualty policies such as homeowners and automotive policies.
5. Review automatic payments for bills that occur each month from bank accounts and on credit cards.
6. Update bills such as utilities and cell phones to remove your ex-spouse.
7. Update mailing address with all financial account providers and creditors, if applicable.
8. Update titles on real estate, automobiles, etc.
9. Take action to separate other accounts you are entitled to and open any necessary new accounts in your name.
10. As needed, refinance debts you remain responsible for and/or remove spouse from open credit lines.
11. If applicable, change your name.
12. Update your name on all existing financial accounts and with creditors.
13. Update beneficiaries and estate plan.
14. Review your current tax structure with your tax advisor or financial professional.
15. Review credit report 30-60 days after closing credit lines.
16. Complete or update your individual financial plan.

Celebrate your new beginning. Now is the perfect time to dream big, face your fears, or maybe a little of both. With thoughtful planning and professional advice, you can get answers to burning questions such as:

• Can I afford to keep the house?
• How much insurance do I need?
• How much will I owe in taxes?
• Do I have enough income and assets to live comfortably for the rest of my life? If not, what adjustments do I need to make?
• What happens when alimony and child support payments end? Will I need to make major lifestyle changes?
  
  

17. Work Your Financial Plan

You have now reached the final step of implementing your new plan. This may include:

• Setting up a cash flow system to make it easy to stick to your budget.
• Rebuilding emergency funds
• Fine-tuning your investment strategy
• Plugging insurance gaps
• Implementing tax-saving strategies
  
  

Planning for Social Security

Featured Resource: Blog – Get the Most from Social Security as a Divorcee

Eligibility Requirements For Social Security as a Divorcee

To qualify for Social Security benefits as a divorced spouse, you must meet three primary criteria:

1. Marriage Duration: The marriage must have lasted for at least 10 years (this period does not need to be consecutive).
2. Marital Status: You must be unmarried when you claim the benefit. An exception exists for survivor benefits: if your ex-spouse is deceased, you can still collect benefits on their record if you remarry after age 60.
3. Age: You must be at least 62 years old to receive reduced benefits or have reached your Full Retirement Age (FRA) (currently 67) for the full eligible spousal benefit.

Benefit Amount and Limitations

A divorced spouse is generally eligible to receive an amount equal to half of their ex-spouse's full retirement benefit. However, you will always receive your own earned retirement benefit if it is higher than the spousal benefit.

If you are working and claim benefits before reaching your FRA, your earnings may be subject to an earnings limit (e.g., in 2024, $22,320). For every $2 earned over this limit, $1 is deducted from your benefit. This earnings limit is removed once you reach age 67.

Survivor Benefits

If your ex-spouse passes away, you may be eligible for a survivor benefit, which is typically the full amount they were eligible to receive. A common strategy for divorced widows/widowers (married for 10+ years) is to claim the survivor benefit as early as age 60 while delaying their own retirement benefit until age 70. This allows their personal benefit to continue growing.

Addressing Common Concerns

• Claiming a spousal benefit will not reduce your ex-spouse’s own benefit.
• The Social Security Administration will not notify your ex-spouse that you have claimed benefits on their record.
• Your ex-spouse's subsequent remarriage does not affect your eligibility to claim on their record.
  
  

Navigating Health Insurance

Featured Resource: Blog – Navigating Health Insurance Post-Divorce: A Few Key Options

There are various options available for health coverage. However, there are three main avenues we would suggest for securing new coverage:

1. COBRA Continuation: The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows a divorcing spouse to continue their former spouse's group health coverage for up to 36 months, provided the employer is in the private sector and has at least 20 employees. However, the individual is responsible for the full cost of the premium plus an administrative fee, which makes it significantly more expensive than employer-subsidized coverage.
2. Health Insurance Marketplace Coverage: Divorce is considered a qualifying life event that triggers a Special Enrollment Period, allowing individuals to enroll in a plan through the Marketplace outside of the annual open enrollment. Crucially, individuals may be eligible for a Premium Tax Credit to help offset the cost of premiums, depending on their "modified adjusted gross income" (MAGI) and household size. The article notes that for divorces entered after January 1, 2019, alimony is no longer includable in the receiving spouse's income, which can make it easier to qualify for these subsidies.
3. Employer-Sponsored Coverage: Obtaining health insurance through a new job is often the most affordable choice, as employers typically cover a significant portion of the premium. This is presented as an alternative if COBRA is too expensive or if the individual does not qualify for Marketplace premium tax credits.

Other important considerations include:

• Dependent Coverage: Plan for children's continued coverage, either under the ex-spouse's plan or a new plan.
• State-Specific Regulations: Be aware that health insurance rules can vary by state.
• Financial Planning: When selecting the best option for you, factor in costs beyond the premium, such as deductibles, copays, and out-of-pocket maximums.
• Health Status: Consider COBRA if there are significant ongoing medical costs or if a large portion of the current year's deductible has already been met, as switching plans mid-year would mean starting over with new limits.

Do You Need Life Insurance?

Featured Resource: Blog – Life Insurance After Divorce

Planning for Long-Term Health Care

Featured Resource: Blog – Planning for Long-Term Care After Divorce

Dealing with divorce is a massive life change, and if you are over 50, one of your most critical post-divorce financial tasks is planning for future long-term care (LTC). Chronic health issues are more common as we age, and without a partner to help, you need a solid strategy to cover the high costs, which are not paid for by standard health insurance or Medicare.

Why Long-Term Care Planning is Crucial for You

• Increased Risk, Especially for Women: Research shows that women live longer and are more likely to need LTC services than men (75% of women over 65 will need care vs. 64% of men). Women also need care for a longer duration (3.7 years on average). You are more likely to become one of the over 70% of nursing home or assisted living residents who are women.
• High Costs: The expense of care is significant, averaging roughly:
  • $5,900 per month for assisted living.
  • $6,483 per month for a home health aide (44 hours/week).
  • $10,646 per month for a private nursing home room.

Your Three Financial Strategies to Protect Yourself

1. Build Up Retirement Savings: Work with a professional to project your long-term needs and set up a systematic savings plan to ensure your retirement assets can also serve as a resource for healthcare.
2. Earmark a Potential Inheritance: If you anticipate receiving an inheritance, consider managing those funds specifically for your future long-term care needs.
3. Tap Into Home Equity: If you own a home, the equity can be a great resource. Options include:
   • Sell and Relocate: Selling your home allows you to convert equity into liquid savings or invest it, potentially moving to a smaller, more practical home or senior living community.
   • Refinance or Reverse Mortgage: Use caution and seek advice for these complex options, which can access cash but also have trade-offs like high costs or limited future options.

Long-Term Care Insurance and Lifestyle

• LTC Insurance: If you are in good health, a policy can be a viable option, covering all levels of care both at home and in facilities. However, be aware that policies for women are significantly more expensive than for men (e.g., a 60-year-old woman's average annual premium is $1,900, compared to $1,200 for a man). If you want to include an inflation protection feature, the cost will rise dramatically. The best time to buy is before any chronic health conditions set in, as 30% of applicants aged 60-64 are turned away.
• Housing and Lifestyle: To age successfully, explore options like senior living communities, modify your home for accessibility, invest in your health and wellness, and build a strong support network of friends, family, or professionals.
• Government Assistance: State-funded Medicaid programs serve as a safety net for those with no other options.
  
  

Updating Your Estate Plan

Featured Resource: Blog – Divorce and Estate Planning: Essential Updates Post-Divorce

Divorce is a major life event that requires an immediate and thorough update to your estate plan. Because your existing documents likely name your ex-spouse in key roles, taking action now is essential to ensure your assets and healthcare wishes are managed by the people you choose.

Here is a summary of the critical steps you must take to update your estate plan post-divorce:

1. Update Your Legal Documents

You must consult with an estate planning attorney immediately to create or update the following essential documents:

• Last Will and Testament / Pourover Will: Your Will directs how your probate assets are distributed and names an Executor to manage the process. You must replace your ex-spouse with a new, trusted person in this role. If you use a Revocable Living Trust, you will need a "Pourover Will" to seamlessly transfer any forgotten assets into the trust.
• Powers of Attorney: These documents are crucial for handling matters if you become incapacitated:
  • Financial Power of Attorney names an agent to handle your finances, pay bills, and manage investments.
  • Health Care Power of Attorney names an agent to make medical decisions on your behalf.
  • The urgency is high because existing documents may still grant your ex-spouse control over your financial and medical decisions until they are formally revoked and replaced.
• Revocable Living Trust: If you choose this strategy, a properly funded trust can help your estate avoid the public and costly process of probate, ensuring assets are distributed privately and exactly according to your instructions.

2. Review and Update Beneficiary Designations

This step is arguably the most critical because beneficiary forms on certain accounts often override your Will. Failure to update them can result in your ex-spouse receiving assets—even if you have remarried.

• Review All Accounts: You must update the beneficiary designations for all financial instruments, including:
  • Life Insurance Policies
  • Retirement Accounts (IRAs, 401(k)s, Pensions)
  • Investment Accounts
• The Hillman v. Maretta Reminder: The Supreme Court ruled in this case that an ex-spouse was entitled to a federal life insurance death benefit because she was still the designated beneficiary, even though the deceased had remarried. You must review the forms on file for every account.

3. Consult Your Divorce Decree

Before removing your ex-spouse as a beneficiary on all accounts, carefully review your divorce decree. It may mandate that your ex-spouse remains the beneficiary on specific assets, such as a life insurance policy, to secure ongoing obligations like alimony or child support. Your estate plan must comply with these legal provisions.

Tax Planning Post-Divorce

Featured Resource: Blog – Taxes After Divorce: Common Tax Savings Strategies

Navigating your taxes after divorce involves major changes, from your filing status to how you withdraw funds. With careful planning, you can significantly reduce your tax burden. Here are the key tax-saving strategies you should implement as a divorcee:

1. Choose the Right Filing Status

• File Head of Household (HOH): If you divorced mid-year, you can file as Single or Head of Household for that year. HOH status offers lower tax rates and higher standard deductions than Single.
• Qualify for HOH: To qualify, you must have paid more than half the cost of maintaining a household for you and a "qualifying dependent," usually a child. Crucially, HOH is generally granted to the parent the child spent the most nights with, regardless of who claims the child as a tax dependent on their return.

2. Strategically Access Retirement Funds (If Under 59.5)

If you need cash flow from retirement accounts before age 59.5, you have options to avoid the standard 10% early withdrawal penalty:

• QDRO Distribution (for 401(k)s/Workplace Plans): If you receive a portion of your ex-spouse's workplace retirement plan through a Qualified Domestic Relations Order (QDRO), you can request a direct distribution of a portion of those funds. While the distribution is taxed as ordinary income, the 10% penalty is waived. This strategy must be done before the assets are rolled into an IRA in your name.
• Substantially Equal Periodic Payments (for IRAs): If you need an ongoing income stream from an IRA, you can set up a plan for "Substantially Equal Periodic Payments" (SEPPs). These regular withdrawals are taxable but penalty-free. Be aware: the payments must continue until you reach age 59.5 or for five years, whichever is later. Modifying the plan early will result in penalties on all amounts previously withdrawn, plus interest.

3. Optimize Your Income and Investments

• Tax-Efficient Withdrawals: If you are supplementing income with withdrawals, diversify your sources. Withdrawals from pre-tax accounts (like traditional IRAs) are taxed as ordinary income, while withdrawals from Roth accounts or brokerage accounts (subject to capital gains rates) are often more favorable. You can strategically mix withdrawals to keep yourself in a lower tax bracket.
  • Note: For divorces finalized after December 31, 2018, alimony is not taxable to you and is not deductible for your ex-spouse, allowing you to utilize "low income" tax planning strategies if child support and alimony cover most living expenses.
• Consider Roth Conversions: If your taxable income is low post-divorce (perhaps due to receiving non-taxable alimony), you may be in a lower tax bracket than you will be in the future. A Roth conversion moves money from a traditional pre-tax account to a Roth IRA. You pay the tax now at your current low rate, and the funds grow tax-free forever, reducing future Required Minimum Distributions (RMDs) and giving you flexibility later.

4. Maximize Health Insurance Premium Tax Credits

• Marketplace Eligibility: If you lack affordable group health insurance, the Health Insurance Marketplace offers plans and the potential for a Premium Tax Credit to lower your monthly premium.
• Income Calculation is Key: Eligibility for this credit is based on your taxable income, and since alimony and child support are not included in that taxable income, you may qualify for substantial credits even if you have a high asset balance. This credit can provide thousands of dollars in annual savings.

Because these strategies interact (e.g., a Roth conversion will raise your income and could affect your tax credit eligibility), you must meet with a qualified tax advisor or financial planning professional to ensure you implement the most effective and personalized plan.

Choosing the Right Investment Strategy

Featured Resource: Blog – Setting Up the Right Investment Strategy After Divorce

Navigating your investments independently after divorce is not just a challenge—it’s an opportunity to build a financial future aligned with your personal goals. Establishing a smart, disciplined investment strategy is crucial to your long-term success.

Here is a step-by-step guide to setting up your post-divorce investment strategy:

Step 1: Understand Your Portfolio's Foundation

Your portfolio should be built on three asset classes, each serving a distinct purpose:

• Cash: Use this for your emergency reserve (aim for a minimum of six months of expenses) and any large expenses you anticipate in the next 12 months. Cash provides security but offers very low returns.
• Bonds: Treat bonds as your lender's stake. They are best for time horizons of 2–5 years, providing steady income and stability to offset the higher risk of stocks. Bonds are subject to creditor risk (if the issuer goes bankrupt) and interest rate risk. Minimize these by choosing shorter-term bonds from high-credit quality issuers (like the U.S. government).
• Stocks: Treat stocks as ownership. They are best for long-term goals and wealth building, offering the highest potential returns but carrying greater risk and volatility.

Step 2: Start with a Written Plan and Time Horizon

Successful investing starts with a plan. Define your purpose, and then quantify your investment time horizon by asking, “When will I need this money?”

• Cash/Bond Buffer: If you are nearing or in retirement, it’s highly recommended to hold sufficient cash and bonds to cover at least five years’ worth of anticipated expenses. This buffer ensures you are never forced to sell stocks at a loss during a market downturn, giving your growth assets time to recover.

Step 3: Create a Personalized Strategy (The 3 Ds)

A successful investment strategy must be tailored to your goals and risk comfort. Simplify your approach using the "Three Ds":

1. Destination: Your time horizon, which dictates the amount of risk you should take.
2. Diversification: The essential mix of stocks, bonds, and cash. You should diversify your stocks by size (large, medium, small), style (growth and value), and geography (U.S. and international). Diversification is the only "free lunch" in investing—use it to minimize risk across the board.
3. Discipline: Market volatility is a certainty. You must commit to responding with logic, not emotion, during market swings.

Step 4: Embrace Total-Market Returns

Avoid risky, unnecessary behaviors that erode returns:

• Buy the Haystack: Instead of trying to "pick winners" by buying individual stocks, invest in broad market funds (mutual funds or ETFs) that capture the overall market performance.
• Avoid Market Timing: Do not try to predict market movements. Trying to buy low and sell high often results in the opposite, and relying on "expert" forecasts can lead to emotional decisions.

Step 5: Monitor and Adjust Your Portfolio

• Rebalancing: Set a regular schedule (quarterly or annually) to review your asset allocation. If your target is 60% stocks/40% bonds, and stocks perform so well that your portfolio shifts to 70/30, you must rebalance by selling some assets that performed well (stocks) and buying assets that underperformed (bonds). This ensures your portfolio remains aligned with your risk tolerance, even if it feels counterintuitive at the time.
  
  

Embracing Your New Financial Chapter

You have successfully navigated a difficult transition, and now you have the knowledge to secure your independent future. We've covered everything from Immediate Financial Steps to securing your healthcare and building a new Investment Strategy.

The complexity of divorce often stems from the need to address every area of your financial life—from setting up Social Security and Health Insurance to protecting your legacy by Updating Your Estate Plan and implementing smart Tax Planning strategies.

The most important takeaway is this: Independence requires action.

Don't let the crucial next steps—like updating beneficiary forms or implementing that new investment strategy—become overwhelming. By taking control of your Life Insurance, Long-Term Care, and retirement assets today, you are securing the financial well-being you deserve for tomorrow.

Ready to turn this knowledge into a personalized, actionable plan?

• Your Next Step: While this guide provides the roadmap, a Certified Divorce Financial Analyst (CDFA®) can help you tailor these strategies to your unique assets and goals, ensuring no critical step is missed.

Don't just survive this transition—thrive in your next chapter.