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RETIREMENT & LIFESTYLE PLANNING | |
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After a number of years of being a pair it can be a shock to be suddenly single again – particularly if you have just lost your life partner, or if it’s ending in divorce proceedings, says Christine Lawrey.
Regardless of the circumstances, just finding yourself on your own can be an emotional and turmoil-filled time. What you do next could determine your future financial security. It may be surprising, but the best thing to do is nothing. In the first couple of months after you’ve experienced such a traumatic event, whether it is the death of your husband or wife, a separation or divorce, you’ll be on an emotional roller-coaster.
Scott Brouwer, certified financial planner with the Flinders Partners Financial Services says often people are not in a position to make sound decisions after such an event.
"They are ruled by their emotions – heartbroken, vindictive, or distraught. I find they need time to settle and think things through before any decisions are made," he says.
Following a particularly painful divorce, one of Scott’s clients, Sarah, was adamant she wanted to keep the family home she’d ?won’ from her now ex-husband.
"Even though the children had left home and she was living in this huge house, she was determined to keep it because of the memories it held," he says.
Three weeks later she changed her mind and put it on the market. Sarah’s original decision to keep the house was clouded by memories, so by not rushing and making plans, it gave her time to clear her head and approach the situation objectively.
"In the end she got a good price for the house, bought a nice unit and invested the rest into a superannuation fund for her retirement. Now, two years later, Sarah, the part-time worker who would have struggled financially, has a healthy looking nest-egg."
If your loved one has died or you’ve just gone through a divorce, there are a number of issues you should consider.
You may need to review your existing insurance cover and take out new policies. For example, you might have a family policy for health insurance and this could be changed to a singles policy.
Will you need to go back to work? If so, you may need to take out income protection. This will ensure you continue to receive a salary, if for some reason in the future, you can no longer work. Being single means there’s no back-up if one income stops.
You’ll also need to update your will. Make sure your assets go to whom you want to receive them. Out of date wills can be a nightmare for the ones you leave behind – so don’t give them that added trauma.
If you are facing a divorce, traditionally the division of assets has led to the husband retaining his superannuation, while the wife the home.
With about 40 per cent of marriages ending in divorce, many women find that their joint plans for retiring on their partner’s super have disappeared. They may end up with the house, but if they need to support children or have a mortgage or other debts the retirement of their dreams may be a long way off.
Women face unique issues concerning their careers and personal and family life, all of which have a significant impact on financial stability.
Due to lower starting salaries and frequent breaks from the workforce, women actually accumulate less superannuation than men do of the same age.
Under new rules to be introduced later this year, a couple, or the court, will be able to serve notice to the trustee that the total superannuation benefit is to be divided between husband and wife. For example, the division could be 50–50 or 30-70 depending on the agreement reached.
Whether you get divorced or suffer the loss of a loved one you’ll need support. Contact Centrelink and find out about the services and benefits to which you are entitled. They also provide a free financial information service where counsellors can help you go through your financial situation.
You may need the services of a lawyer, accountant, insurance specialist or financial planner. If you are faced with divorce the child support agency may become involved to assist with custody issues.
While all this may sound like doom and gloom, there is something you can do now to soften the blow.
Brouwer advises people to put aside the equivalent of three month’s salary in the event of an emergency like a separation, loss of job or if your partner suddenly died.
The money needs to be easily accessible. It could be held in cash or invested with the contingency component available to be drawn down.
According to Belinda Lundberg, certified financial planner with Investwell Australia, funerals often cost more than what people think they will and it’s the one thing they never want to budget for.
"You need to allow at least $10,000 for funeral costs. It’s a good idea to account for this in your contingency or emergency funds as a part of your overall financial plan," she says.
Considering some of these options - such as a little stash of money put away safely – won’t make being single again a breeze, but it will make it a little bit easier.
Contact: Christine Lawrey, Financial Planning Association
Ph 1800 626 393
Web: www.fpa.asn.au
SINGLES STRATEGY CHECKLIST
- 1. Do not make big decisions
It can be to your detriment rather than benefit if you make any really big decisions at this time. Understand that you will need time to adjust to the new situation you find yourself in and to decide what you want to do next.- 2. Gather information
At the first possible opportunity, gather all your important documents in the one place. These will be legal and financial documents such as your will, marriage certificate, bank statements, mortgage documents and insurance policies – and most importantly – any outstanding or overdue bills.- 3. What are my expenses?
Get a clear idea of your living expenses. Find out about any upcoming financial obligations such as bills, school fees, maybe even your daughter’s wedding that’s been in the planning stages for some time.
This will give you a snapshot of your financial situation and will help you to get organised so that you can start planning for securing your financial future.- 4. Start thinking about the future
Now that you find yourself on your own, what do you want to do? Do you need to go back to work, start a new career? Maybe you should consider selling your house or car and downsizing to something more appropriate?
Think about the options that your have and start to set some new goals.- 5. Seek professional help
A financial planner can guide you through the maze of financial decisions that you may have to make following your divorce, separation or the death of your partner.
Spending the time to consult with a professional can save you a lot of heartbreak in the long run. A certified financial planner can help you set new goals and put strategies in place to help you reach them.Some documents you will need:
- Birth certificate
- Insurance policies
- Mortgage documents
- Leases
- Trust documents
- Cemetery deeds
- Employment contract
- Marriage certificate
- Will
- Brokerage account statements
- Superannuation statements
- Binding death benefit contract
- Tax returns
MOVING SLOWLY
Judy lost her husband Bill last November to cancer. During 30 years of marriage Bill had controlled all the financial affairs. Not only was Judy distraught at the loss of her life partner, but she was also frightened of having to make decisions about her money for the first time in her life.
In early March, Judy decided to get some help from financial planner, Belinda Lundberg. Her main concern was whether she had enough money to pay the bills. To outside eyes it may seem like a simple question, but to Judy who was still grieving for her husband and didn’t even know how to pay a bill, it was a scary one.
Judy’s assets included:
- large family home
- $250,000 direct shares in her husband’s name
- $180,000 direct shares in her name
- an investment property with mortgage attached
- six different bank accounts
Belinda’s first task was to help Judy to start managing her day-to-day expenses. "Together we set up a budget and a filing system which Judy could use to help keep track of her incoming and outgoing monies. I also spent time showing her how to do financial tasks like paying bills and operating her bank account," Belinda says.
The large family home was getting old and would soon require extensive renovations, so Judy decided to downsize and move to a townhouse which would be easier to manage.
Bill’s shares were transferred into Judy’s name. The share portfolio of now $430,000 was diversified into international shares where previously it had been over-exposed to Australian shares.
"We needed to diversify her portfolio to match her risk profile – which as you can imagine was low risk," says Belinda.
Even after a number of months there are still decisions to be made. Judy must next decide whether to pay off the mortgage on the investment property and consider alternative investments in an effort to minimise tax on income coming from other sources.
"We’ve moved very slowly so far, as Judy is still grieving for her husband. She’s on a big learning curve and finds it hard to make decisions, but with support from family and a team of professionals, she will have a very secure future," Belinda says.
Client names have been changed to protect their privacy.
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