This is part 5 of a 7 part interview with Massachusetts divorce mediator Tracy Fischer acknowledging that divorce can be challenging for women, our panel of experts offers practical tips on navigating financial concerns, keeping emotions in check and rediscovering themselves. Watch the entire Navigating Divorce interview video.
Jenine G.: Let’s go and talk about savings and retirement accounts.
Tracy Fischer: Most savings and retirement accounts that are earned during a marriage are considered a marital asset. It’s important to think about how much house you’re going to have, how much retirement you’re going to have, how much savings you’re going to have, so that you have a balanced portfolio. It does vary in different states, but I think most states are similar in the sense that all accounts are divided equitably. In terms of retirement, it’s a little more complicated. As I said before, one person may have been socking all their money away into a retirement account, the other person may not have. Money may need to be transferred from a husband to a wife or from a wife to a husband in order to make that retirement equal for both. There’s something called a qualified domestic relations order or QDRO by its short form. It’s a fairly complicated process. The way retirement plans are divided is covered by Federal law.
Tracy Fischer: Normally you can’t take any money out of a retirement plan, and this allows you to roll it over without any fees or taxes, so it goes back into a retirement plan. I suggest that people really start talking about that first, and getting the process of the QDRO started right from the beginning.
Jenine G.: But that’s something you can walk them through.
Tracy Fischer: I do. Many mediators don’t do the QDROs, and there are people who specialize in just preparing QDROs.
Jenine G.: You also brought up what was interesting, the CDFA, certified divorce financial analyst, which seems to be a helpful part of someone’s team, but I never heard of that designation before, what is that?
Tracy Fischer: A CDFA is a certification for someone with financial background. It can be a CPA or just someone with knowledge of finances. They’re really focused on divorce and all of the complications that arise when people are divorced. They’re not doing somebody’s taxes. They’re not doing the bookkeeping of a business. They’re solely focused on what are the ins and outs and the issues with complex divorce situations, complex assets and divorce. They can be really helpful, and they can be very neutral. So you’re not using your accountant that you had during the marriage, you’re using someone who’s looking at it from the point of view of being objective.
Jenine G.: Money causes a lot of emotion. It sounds like that is a smart thing to add, someone could be neutral. People bring a lot of things to the table when it comes to divvying up assets and some personal items. I know you had a dog.
Lori Hubbard: With Ted, yes. We had a custody issue with the dog.
Jenine G.: A custody issue with the dog.
Lori Hubbard: Yes. Thankfully he moved out of state, so it fixed itself. But for a short time, yes, we did split custody.
Jenine G.: Okay. What are some of the other personal things that you’ve seen, Tracy, come to the table that you would have advice on how to look at it or divvy up or what to think about it?
Tracy Fischer: Well, I would say that the issue of an engagement ring is always very touchy. People sometimes feel really strongly one way or the other. Someone may want it, someone may not want it, both people may want it. I often suggest people look at, where did the ring come from? If it came as a family heirloom, it should go back to the person whose family it came from. Sometimes a ring, the actual diamond could be set aside for when a child gets married. Rings are a lot more costly when you buy them than when you sell them, so it’s not as big of an asset as most people think.
Lori Hubbard: I do think that question comes up a lot. I didn’t really know what to do with the ring, but people do bring it up. I remember, in hindsight, when my ex-husband asked for the ring back, I wasn’t totally attached to it, so I gave it back without really giving it a second thought. But then I also had another friend who got divorced and then she was asking me during the process, what do you do with the ring? And so she ended up selling her ring and then taking an awesome trip, which in hindsight, I kind of wish I did the same thing. Sell it, take an awesome trip, celebrate the next chapter.
Jenine G.: Yeah, well, that was a big ring, because I sold my first one and basically went out to lunch with those proceeds. The second, I gave back, which I should have flipped, because obviously the second one was way bigger than the first one, but hindsight being 20/20. So, what are some other items, Tracy? People have collections and family heirlooms, I mean, should they just walk around the house and start making a list of things? What do you do?
Tracy Fischer: I often suggest that things that each person brought into the marriage that may have been family items, go back to the person that brought them in, and that usually makes that a little bit easier. I also find that although it’s a very emotional issue as well, people tend to want different things. There really isn’t as much controversy as you would think. I suggest each person write a list of what they want, and then they exchange it. It may be four or five things that they both want, so they can work that out. But getting into selling things and figuring out how much things are worth, that really is a waste of time and money.
Jenine G.: Yeah. I’m glad to say third time is a charm for me, but if we ever did go down the route, he can have the beer stein collection, all his. So Lori,, we know that everybody’s situation is different depending on their life stage, right? What are some financial considerations that women should be thinking about depending on which stage they are in life?
Lori Hubbard: Yeah. A few things to consider, if you’re divorced with children, there’s going to be the current and future cost of children, right? So, are you having to pay for daycare? Do you have costs related to children with special needs? And then also, of course, there’s going to be the cost of college in the future. If you’ve stayed at home, are you going to be reentering the workforce and having to work part-time? Then there’s also, if you’re divorced with no children, you do need to consider the self-care aspect and then planning for the needs of your long-term care. Then there’s also divorced for people over 50, there’s the new term out there, the gray divorce. And then you’re really going to have to consider your Social Security benefits at that point.
A lot of women are not aware of the fact that they can actually claim Social Security on their ex-husband. And so being aware of different benefits like the 10 year rule or remarriage and how that’s going to affect your benefit.
Jenine G.: What’s the 10 year rule?
Lori Hubbard: So, the 10 year rule is if you have been married for at least 10 years, you can claim Social Security on your ex-husband’s record. This works both ways of course.
Jenine G.: Interesting. So if you’re considering it at year nine …
Lori Hubbard: Eek it out a little bit.
Jenine G.: Maybe, right?
Lori Hubbard: Yeah, that’s right. That’s right, yeah.
Jenine G.: That’s interesting. So 10 year rule, and I think it’s important to know that women can claim social security on their ex’s record, and it does not affect-
Lori Hubbard: It does not affect them.
Jenine G.: Okay. That’s really important.
Lori Hubbard: Yes. But also be aware, this is not advice that the Social Security Administration is necessarily going to give you. So this is a great time to meet with your financial advisor and start talking about a second opinion or advice that they can offer you with your own personal situation.