Everyone has a different vision for their retirement. Often it can include lots of time with grandchildren and friends, travel and interesting hobbies… but for some, it is a time of significant change.
While many of us expect to enter our retirement as part of a couple, there are also many people who find themselves newly single at this point in their lives.
Overall, Australian divorce rates have fallen in the past two decades but we’ve seen a statistical increase in the 55+ age group. The number of men in this age bracket involved in divorce proceedings has doubled, and for women the number has almost tripled.
After a divorce there are new challenges ahead for retirement planning but there are also positive aspects that can have a beneficial impact on your wellbeing.
Divorce and your finances
It’s undeniable… divorce comes at a cost. Apart from the emotional toll it has on a person, it can also affect your finances dramatically. This is especially the case for women, who have historically tended to manage more of the household tasks and look after the childcare responsibilities within a family.
Women who have typically relied on the income and assets of their partner for their financial security can find themselves in a vulnerable position.
We know it is common for women to leave the workforce to raise children and to re-enter only in a part-time capacity. This subsequently means they earn less superannuation and already have less funds put aside for their retirement income.
If you are going through a separation, then it is important to be aware of the potential for some financial insecurity and to prepare a new plan for your retirement.
The ups and downs of being alone
Making the decision to go your separate ways can be daunting, but there are some obvious advantages to leaving an unhealthy relationship. Not only can it be beneficial to your general wellbeing, it may be easier to live your dream retirement without having to align your vision with a spouse.
However, the cost of living for a single doesn’t necessarily equate to half that of a couple.
Many day to day costs are the same regardless of one or two people… for instance, car registration rates won’t change, home and contents insurance is likely to be similar and some utilities will vary only slightly.
Government benefits are also assessed differently for couples and singles. Thresholds for singles are generally not half of those for couples. For example, a single can earn up to $174 of income per fortnight before their Age Pension reduces, while a couple can earn $308. Once you have a handle on your new financial situation, it is worth checking whether you are eligible for benefits that you may not have been while you were in a couple.
If your family home is to be sold as part of the separation then finding a new property also needs to be taken into consideration. If you are in a rental property, a smaller dwelling could come at a lower cost, but if you still have children living at home this might not be a suitable option. Again, we recommend being prepared to make some tough decisions… including about whether it’s time the kids flew the nest. With your retirement just around the corner you need to make sure you feel positive about the future.
Make the most of what you’ve got
As part of your divorce, it’s likely that a financial settlement would be involved. This is where you need to be mindful of making the most of what you receive. When the court decides how to divide assets and debts, everybody will have their own unique situation. Seeking professional financial advice can help you determine the best way to manage your assets and prepare for the years to come.
Developing and sticking to a budget can certainly help you maintain a level of financial security and is a good habit to start early.
Smart financial management is the best way to make sure going solo in retirement brings you all the happiness you deserve.
To find out how we can help you with your retirement planning, contact our team today.