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Ways to maximize your retirement financial security after divorce

Divorce will impact California residents in many ways. One of the things you need to think about, no matter what your age, is how it will affect your security in retirement.

Last year, a study by the Center for Retirement Research showed that divorce will have a negative effect on financial stability in retirement. However, there are steps you can take to make sure you have enough money for your senior years.

According to the research center, the short- and long-term impacts of divorce on retirement security include:

  • Divorce-related costs
  • Selling a home before it has achieved an optimal financial return
  • The cost of living in two households
  • Splitting financial accounts, including retirement accounts
  • Reduction in available credit
  • Difficulty in saving money
  • Potential tax increase by not filing a joint tax return

The research study also showed that households where a divorce has not occurred have about 30 percent higher wealth than that of divorced households. And nondivorced households have a 48 percent chance of being at risk of financial instability – meaning they can't maintain their standard of living when they retire – as opposed to 53 percent of households with a divorce.

There are things you can do to minimize the impact divorce will have on your retirement finances.

  • Stay married for at least 10 years so that you can gain higher Social Security benefits if your spouse has made significantly more money than you.
  • Settle your divorce out of court to save money.
  • Downsize your cost of living so that you can put money away for retirement.

When you divorce, you'll want an attorney on your team but a consultation with a financial planner also would be beneficial to help you plan for both your immediate and retirement financial needs.

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