“I think we would be surprised at how often clients neglect this step,” she says. “I would say that it is prudent to do an audit of all retirement plans and life insurance policies to review how the beneficiaries are structured.”
3. Review clients’ Social Security options.
Clients are often unaware that under certain conditions, they can claim their ex-spouse’s benefits, says Timbers. If a divorced client was married to their spouse for at least 10 years, and did not re-marry prior to age 60, then they can collect Social Security based on an ex-spouse’s work record.
“We often come across situations where clients believe that claiming based on their ex-spouse’s work record would reduce their ex-spouse’s benefits, and that’s not the case,” says Timbers. “This is an advantage that the client should be aware of.”
4. Review and re-establish retirement goals.
Because planning for an individual’s retirement is different from planning retirement for a couple, divorce provides an opportunity to create a new plan, Timbers says. Divorced clients may want to retire earlier or may not be able to save as much, requiring new strategies to reach their financial goals, she says.
“Creating a new plan is very important,” she says. “A lot of the facts surrounding the client’s situation have changed. Couples can have differences in age, which results in a different investment horizon or different household expenses to plan for in retirement.”
5. Reassess clients’ investment allocations.
For divorced clients, especially women, it’s important to review investment allocations to make sure they are still suitable and in the best interest of the client, says Timbers, particularly in cases where the ex-spouse strongly influenced the asset allocation.
“Oftentimes they find that their investment allocations are based more on their ex-spouse’s risk tolerance than their own,” says Timbers. “Maybe their goals are different, the timeline for retirement has changed or they find that their financial outlook is different than when they were a couple.”