7 Little-Known Financial Benefits of Divorce

Divorce is often devastating, but there are a few financial silver linings.

From the cost of the lawyer to the loss of a spouse’s income, divorce often comes at a high price. What’s more, spouses may walk away from the proceedings with significantly fewer assets and retirement savings. That’s not to mention the emotional toll of the process.

“At the end of the day, divorce is terrible,” says David Hays, president of Comprehensive Financial Consultants in Bloomington, Indiana.

However, that doesn’t mean the news is all bad. While not a reason to run out and get a divorce, here’s a look at seven financial benefits that could make a sad situation seem a little better.

1. Easier budgeting and greater control over money. The end of a marriage can mean the end of fights over money. There is no more struggle over which categories get priority in the budget; no more evenings spent cajoling or pleading with a spouse to rein in spending. “On the other side of divorce is some freedom,” says Elijah Kovar, a partner with Great Waters Financial in the Richfield suburb of Minneapolis.

Nancy Hetrick, a senior financial advisor with Better Money Decisions in Phoenix, can attest to that. In the six months after her divorce to a spendthrift husband, she accumulated $20,000 in savings, thanks to her ability to set her own budgeting priorities. Meanwhile, her ex racked up tens of thousands in debt over the same period. “Typically, it’s going to be positive for one person, not the other,” she says.

2. Early access to a retirement fund, penalty-free. A divorce is one of the few times a person can pull money out of a retirement account early and not pay an early withdrawal penalty. When an agreement known as a qualified domestic relations order is reached as part of a divorce, it allows for an early withdrawal from the account. This money is exempt from the typical 10 percent penalty assessed to those younger than age 59 1/2, although income tax still needs to be paid if the money is not rolled into an IRA.

Cashing out part of a retirement account can be a risky move, but it gives the newly divorced some options they may not otherwise have. “You can really get someone in a much better cash-flow position,” Hetrick says of the smart use of that money.

Ric Edelman, founder of Edelman Financial Services, cautions people not to be too hasty about withdrawing money from an account. He notes that sometimes, in amicable divorces, people try to split the balance of a retirement fund without a qualified domestic relations order. That can be an expensive mistake. “Don’t make any decisions without the advice of an attorney and a financial planner,” he says.

Think of it as a financial decision, not an emotional one.

3. Potentially better investment returns. Divorce could mean better investment returns, at least for women, says Mela Garber, principal at accounting firm Anchin Block and Anchin in New York City. “Men usually take a more aggressive approach to investments and take more risks,” she says. Her observation is backed up by studies such as a 2017 analysis by Fidelity Investments that found women were less likely to fully invest in equities and earned marginally better gains than men. After a divorce, women have the opportunity to take over their own retirement planning, which could be a financial positive in the long run.

4. More college financial aid for the kids. Divorce can be difficult for children, but there is one place where they come out ahead: college financial aid. The Free Application for Federal Student Aid only requires financial information from the custodial parent rather than both parents. However, child support and alimony received from the non-custodial parent must be included on the FAFSA. “We’ve structured some really creative settlements to minimize the income of one parent,” Hetrick says. Additional financial aid is a little-known benefit of divorce, but one that is significant.

5. Social Security perks for older divorcees. Divorced spouses may be eligible to file for Social Security spousal benefits at retirement. You’re entitled to these benefits if you were married to your spouse for at least 10 years. “The ex doesn’t even know you’re doing it,” Edelman says. “It doesn’t have an impact on the benefits the ex will receive.”

If you were 62 by Jan. 1, 2016, you can file a restricted application for Social Security spousal benefits once you hit full retirement age. No longer allowed for younger workers, this application will allow you to receive half your spouse’s benefit while you defer your own and let it grow until age 70. For married couples, this only works if a person’s spouse has already started his or her benefit. However, for divorced spouses, the rules are different. “When divorced, you don’t have to wait until your ex turns on Social Security,” Kovar says.

6. Opportunity to reset financial priorities. While people are sometimes resentful of lifestyle changes necessitated by divorce, finance experts say the opportunity to rethink priorities and start fresh can be a positive. Even major adjustments, like giving up a family home, can be beneficial in the long run. “Sometimes it’s financially better to have a smaller house or apartment,” Garber says.

7. A better bottom line. As Hetrick discovered, divorce doesn’t have to mean a depleted bank account. Even on a lower income, divorced people can build wealth by making smart use of their resources.

The reality is not everyone’s financial situation will improve with divorce, but some people are surprised to learn that it does. “One [client] said, I don’t know why I have so much money now,” Hays says.

Getting a divorce isn’t something to rush into, but if you find yourself in the midst of a crumbling marriage, don’t despair. You may still come out ahead thanks to these little-known financial benefits of divorce.

Source: https://money.usnews.com/money/personal-finance/family-finance/articles/2017-09-29/7-little-known-financial-benefits-of-divorce

Yes, You Can Raise Happy Children After Divorce

What kids really need to thrive

When we first started talking about splitting up, our child was the main reason I told myself I couldn’t do it. While I believed he'd be fine, I also suspected he’d be more fine if I were in a happy, intact marriage. Sure, research shows that the vast majority of kids of divorce show no lasting negative effects on their grades or social skills, life satisfaction or self-esteem. But what about those tiny, subtle shocks that don’t register on a study? Wasn’t a marginal marriage a better choice, really, than no marriage at all?

Well, no. For one thing, staying in my marriage was no longer an option. Secondly, the more I began talking to researchers, clinicians, divorced parents and adult children of divorce, the more it became apparent that I could raise a happy, healthy child in a variety of scenarios—including not being married to his dad.

It seems hard to believe. Intuitively, we just know that children should be raised by two married parents living together. Preferably with a floppy dog lounging by the fireplace, one or two siblings, and organic herbs springing from a kitchen window garden. But an avalanche of studies over the past 40 years shows that this isn’t what they need.

Research shows that about 80-percent of children of divorce adapt well and see no lasting negative effects on their grades, social adjustment, or mental health. These findings arrive from a variety of sources, including a 20-year study done by psychologist Constance Ahrons, published as the book We’re Still Family. Development psychologist Mavis Hetherington’s work following 2,500 children of divorce also showed about 80-percent of the kids doing well, as did a 2012 meta-survey analyzing about a thousand studies on childhood adjustment done over the last four decades, conducted by child development expert and Cambridge University professor Michael Lamb.

Michael Lamb’s meta-study, “Mothers, Fathers, Families, and Circumstances: Factors Affecting Children's Adjustment(link is external),” sums up the features of a supportive childhood:

• Children do well when they have good relationships with both parents or primary caregivers, adults who basically get along. But those parents don’t need to be married or living in the same house.
• Children benefit from emotionally stable parents—adults who are recuperated enough, in the case of divorce, to focus on the basic job of parenting, including establishing stability, exercising fair discipline, providing love and being emotionally responsive. But those parents need not be married or living in the same house.
• Children need adequate resources such as food, safe housing, and social support. But they don’t need a mansion with every toy available, and those resources can be provided by parents who are not married or living in the same house.

What Lamb’s exhaustive overview and the work of dozens of other scholars shows is that marriage isn’t what matters so much to a child’s wellbeing, but rather a loving relationship with parents who aren’t embroiled in conflict, and a decent home life. All families have good times and bad, and children face any number of disappointments as they grow. Divorce is a subset of parenting, not some freakish, outlier experience.

“The mere fact that the majority of children raised in single-parent or divorced families are well-adjusted undercuts the argument that children 'need' to be raised in traditional families. These process factors, rather than family structure, affect adjustment in both traditional and non-traditional families,” said Lamb.

For my own divorce, I came up with these Five Principles for Positive Co-Parenting:
Because we know that high conflict between the parents is one of the most damaging experiences for children, we can foster cooperation with our co-parent, and work to squash conflict.

1. Because we know that children benefit from stability, we can focus on establishing new routines that work in our newly structured lives.
2. Without a spouse around to blame for, well, everything, we can let divorce challenge us to be a better, more focused parent and to bring our personal strengths to our child-rearing. We also can look for ways that the very characteristics of our ex that annoyed us in marriage (“He’s such a neat freak!” or “All she cares about is hiking!”) may benefit our children; how great to have one parent who likes the outdoors.
3. We can create positive moments for our children that have nothing to do with the state of their parents' love life. We can foster engagement in outside activities and with other supportive adults.
4. Because we understand that being emotionally present for our children rests on our own recuperation, we can prioritize taking care of the care-givers, ourselves.

I often think about Elizabeth, a twenty-something from a tiny Texas town whose parents divorced when she was two. As a child, she and her mother lived with her grandparents, while her dad moved to a cattle ranch nearby. Her mother worked hard to develop and maintain a wide circle of family friends, and her parents remain cordial to this day. Rather than feeling isolated, the divorce wound up broadening her sense of support. “I felt more loved than I think I would have had they stayed married,” Elizabeth told me.

Parenting while divorced may require some new education, some extra attention paid to your own mental and physical state, and to your children’s. But neither my child, nor yours, are lifelong victims because their parents didn't stay married. We have a great deal of control over the home life and the quality of the relationships we create.

Source: https://www.psychologytoday.com/us/blog/splitopia/201503/yes-you-can-raise-happy-children-after-divorce