When people get divorced in Pennsylvania, their future may look quite different than they originally envisioned. Their efforts to plan for their well-being and success may require some modification to maintain their goals and ambitions.
Estate planning is one area where divorced individuals will need to put in some work. Outdated estate plans that show no indication of marital changes may not function nearly as effectively and create disappointment in the future.
Budgeting and beneficiaries
One of the first things people should do after a divorce is to budget. Being solely in charge of their finances may mean a significant reduction in how much they can contribute to their retirement savings. Their effort to create an updated budget will help them identify how much money they can reasonably contribute to their retirement savings, as well as the frequency of their contributions.
Another important update people should make according to Forbes is to update their beneficiary designations, as well as disinherit their former spouse. People who neglect these changes may unknowingly have to honor the original terms of their estate plan agreement despite the termination of their relationships with certain people.
Legally planning for the future
Retirement benefits are one of the more complicated matters of a divorce. People must understand the impact of their decisions on the outcome of their retirement savings. Certain benefits require the implementation of a Qualified Domestic Relations Order or QDRO to legally separate assets and clarify the breakdown of who will get what.
Fidelity also reminds people of the importance of understanding the legalities of money received as alimony. As of the start of 2019, people cannot contribute funds received as alimony toward their IRA. This is because there is no tax withdrawn from alimony and IRA’s require taxable income for use in contributions. People who understand the restrictions and rules for planning retirement post-divorce may successfully avoid costly missteps.