The divorcing woman's dilemma By Linda Stern
Sat Jul 22, 8:18 AM ET
WASHINGTON (Reuters) - Financial advisers have long noted a fear common among their female clients -- the fear of ending up homeless, penniless, alone, and on the street.
It's a fear that stems, at least in part, from the fact that women tend to get poorer when they go through a divorce. Now, many financial advisers are stepping up to help women negotiate those waters.
"Divorced women are swelling the poverty rolls," writes Carol Ann Wilson in an article titled "How to Help Older Divorcing Women Avoid The Bag Lady Blues" in the June issue of the Journal of Financial Planning.
"Why? The courts are trying to split marital property 50-50, yet
they traditionally overlook one major asset of a marriage: the husband's career."(emphasis added)
Wilson, who specializes in divorce issues and has written several books on the subject, asserts that in traditional marriages,
the wife is not getting a big enough piece of her husband's future earnings potential.
"Property is divided just once, but career assets continue to produce income regularly for years," she says.
A 50-50 split might not be fair for the woman who followed a lesser career path to raise children while her husband went full tilt, gaining seniority at work and earning benefits like health and disability insurance and vacation pay.
Then there's the house, or "marital museum," as Manhattan divorce financial analyst Michelle Smith calls it. "A weakness that often hurts women is their determination to keep the family house regardless of their ability to afford it in the long run," she says. "They will trade away every asset in order to keep a house they may not be able to afford in five years."
Divorcing women should be open to the idea of giving up the house and taking cold, hard cash -- in the form of retirement investments -- instead, she advises.
Here are some other tips for women approaching divorce.
-- Read up on the issues. On the Internet, check out
http://www.equalityinmarriage.org, and
http://www.divorcenet.com. Or read Wilson's "ABCs of Divorce for Women" or the Divorce Survival Guide from the Institute of Divorce Financial analysts.
-- Add a financial professional to your list of advisers. You may already have a lawyer, a therapist and a best friend to help you through the difficult divorce year. But add a certified divorce financial analyst (find them at
https://www.institutedfa.com/) or a certified financial divorce practitioner (
http://www.academyfdp.org). These pros are trained in highly technical issues like how to split a retirement account, how to find money that a spouse may be hiding, and how to split a family business in a way that doesn't run it into the ground or give it to Uncle Sam.
-- Get financial help, even if it's an amicable divorce. That's because well-intending partners may not understand the finer points of dividing marital assets. They could make some big blunders aiming to be fair.
-- Look at the variety of assets in the marriage and consider their future value. A house with a mortgage that might appreciate by single digits over the long term is not the equivalent of a tax-deferred account invested in stocks that appreciate more than 10 percent a year.
-- Think about retirement. Tax-deferred plans can be split, but many husbands want to hold on to their plans, notes Wilson. The divorce settlement could require him to pay his wife the equivalent of half of the account in payments spread out over a few years. But the plan should include interest and also take into account the effect of tax deferrals she may not be eligible for.
-- That house. It can be great to walk away from a divorce with the house, especially after the real estate appreciation of the last few years. But besides being able to keep up mortgage payments, house-getting spouses should think about taxes, too: That big gain is taxable when the house is sold. If they're toting up equal his-and-hers columns, the after-tax value of the current value of the house, minus the mortgage, should be used.
-- Careers count. Just because both spouses work doesn't mean alimony should be off the table. There are still many traditional couples out there (and more young ones, too) who send the man in for the high-paying job while the woman works in a lower-paying field and takes on more child-rearing responsibility. It takes money to buy time for the low-earner to play career catch-up. Sometimes she's too old to really catch up, and alimony or retirement benefits should continue for longer periods.
-- Don't forget college. Don't sign a divorce decree until the college bills have been discussed and planned for. Children of divorce may be less likely to go to college than children of intact marriages, mainly because their parents fail to support them adequately. It's fairer to pro-rate college responsibility by the earnings of the parent than it is to simply split it 50-50, says Smith. But of course earnings change. So even the best of settlements can end up back in court for an update when junior starts getting those acceptance letters.
(Linda Stern is a freelance writer. Any opinions in the column are solely those of Ms. Stern. You can e-mail her at lindastern(at)aol.com.)
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