Divorced retirees often need help with finances

Business Wire

Most happy couples don't spend time thinking about what their life would look like in the event of a divorce. However unromantic the idea of discussing a retirement plan with your significant other may be, it's crucial that both individuals in a marriage have a working knowledge of the family finances-just in case.

Three of four retirement-aged divorcees need a better understanding of how to manage their personal finances, according to a new Personal Financial Planning Trends Survey of CPA financial planners from the American Institute of Certified Public Accountants. As the divorce rate for Americans over the age of 50 has doubled since 1990, an increasing number of Americans near retirement age will find themselves scrambling to solidify their finances as they approach their golden years.

As marriages sour and couples divorce, there are stark differences in how men and women approach their finances as they prepare for retirement. The survey found they were equally as likely to experience a deterioration of their spending habits postdivorce-women, 25.7 percent, and men, 24.9 percent-but the similarities ended there.

CPA financial planners said their female clients are far more likely to adopt positive financial behaviors post-divorce than their male clients. In fact, women are twice as likely to seek out a job and increase their savings toward retirement. Women were found to be almost four times more likely than men to improve their spending habits-42 percent to 12 percent-and roughly 14 times more likely than men to actively seek out financial advice after divorce-60 percent to 4 percent.

"When couples get divorced later in life, there is often oñe partner in the relationship who handled all of the finances," says Tracy Stewart, a member of the AICPA's Personal Financial Planning executive committee. "In my experience, it's usually the husband, particularly in boomer-age couples. In many instances, this leads to one person in the relationship not having an accurate picture of the family finances, including their retirement savings. It is essential that couples who get divorced later in life take a long view when dividing assets and making financial decisions."

The survey also asked CPA financial planners what steps would have prepared their clients near retirement age better financially for divorce. Three-quarters of respondents cited understanding how to manage personal finances, while just under 75 percent said understanding the long-term financial planning consequences of a divorce settlement. .Just over half cited understanding the tax implications of a divorce settlement.

"When happily married couples are making financial decisions, they very rarely consider what would happen in the event they divorce," Stewart says. "The unfortunate truth is that the process of dividing assets is a lot more complicated than saving and investing. The good news is that CPA financial planners have a strong foundation in tax planning and can help ensure that a divorce is settled in as tax-efficient a way as possible."

She adds, "Divorce is a complex financial event that often means calculating spousal support or child support, making sense of pensions and investments, and deciding what to do with the house. Until both parties understand exactly what they have, they can't realistically make a financial plan for the future."

The additional steps CPA financial planners felt would have better prepared their clients for divorce were updating wills or trusts, 51.2 percent; increasing saving for retirement, 50.7 percent; and decreasing spending, 42.8 percent. Those findings reflected the importance of keeping documents accurate and up to date and building up savings before assets are split-good advice for couples at any stage of their marriage, the AICPA said.

Interestingly, roughly one in three planners cited establishing a prenuptial agreement as a step that would prepare their clients better financially for divorce.

Regardless of whether a couple were married recently or have been together for years, Stewart urges that both parties establish open and regular communication about their financial life and plans for retirement and work to get on the same page about their approach to saving and spending.

The AICPA's PFP Trends Survey is administered as an online survey to CPAs who are members of the AICPA Personal Financial Planning Section.

The AICPA's Personal Financial Planning Section provides information, tools, advocacy, and guidance for CPAs who specialize in providing estate, tax, retirement, risk management, and investment planning advice to individuals, families, and business owners. The primary objective of the PFP Section is to support its members by providing resources that enable them to perform valuable personal financial planning services in the highest professional manner.

CPA financial planners are held to the highest ethical standards and are uniquely able to integrate their extensive knowledge of tax and business planning with all areas of personal financial planning to provide objective and comprehensive guidance for their clients, the AICPA says. The organization offers the Personal Financial Specialist credential exclusively to CPAs who have demonstrated expertise in personal financial planning through testing, experience, and learning, enabling them to gain competence and confidence in PFP disciplines.

The American Institute of CPAs bills itself as the world's largest member association representing the CPA profession, with more than 418,000 members in 143 countries, and a history of serving the public interest since 1887AICPA

members represent many areas of practice, including business and industry, public practice, government, education, and consulting.

The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofits, and federal, state and local governments.

It develops and grades the Uniform CPA Examination, offers specialized credentials, seeks to build a pipeline of future talent, and drives professional competency development.