Saturday, February 1, 2020

Social Security -- Your Safety Net?

Don't Ignore Social Security
While there often seems to be talk about cutting  back on Social Security, it seems pretty clear that it will be around for a while. If you are 55 years old or older, you have a good chance of collecting under the program. Even if you are younger, there's still a good chance that you will receive payments.

I won't get into a discussion of whether it is good or bad or undependable. For now, it's a fact of life and we are all (or most of us) are under its umbrella. It's not really likely to run out of money unless someone takes a drastic step to terminate it, which feels very unlikely.

Income for the Retirement Years
The point of bringing up Social Security is that it is an often overlooked source of income later in life. "Gray divorces" are becoming more common as Baby Boomers are getting divorced later in life.

A big part of the focus in gray divorces is the retirement years. If one or both of the parties have not retired by the time of the divorce, there's still time to add to retirement funds.  Otherwise, the parties just have to split a set pot of money for retirement.

Financial Planning
That's where a financial planner can come in handy. A good planner can help you decide on a mix of assets and Social Security to take you through the retirement years. You may need to generate new income to cover your expenses. That should be coordinated with your decisions on when to start Social Security and whether you are eligible to draw on your spouse's earnings record.

Divorce Financial Planning
If you go into litigation for a divorce, instead of having a Collaborative Divorce, your options are a little more limited. Courts typically just mechanically divide the assets on the table. In Collaborative, we work with a divorce financial planner who usually helps you plan a future cash flow. Then you can be smarter in negotiating the asset and debt division.

Using Social Security for the Maximum Benefit
With the Collaborative process, you can incorporate more planning for the future, including getting the best possible revenue from Social Security.  Postponing the start of drawing Social Security will result in a higher payment each month. Sometimes the big issue is how to get from here to 70 years old so you can start drawing at the maximum level.

If you are in the "gray area", talk to your attorney about using Collaborative Law to work out the terms of the divorce. If the attorney doesn't do Collaborative or recommends against it, you should get a second opinion.

Find an attorney you are comfortable with who has substantial experience with Collaborative Law so you can be guided through the process. It's your divorce and you should be able to choose the process most beneficial to you.  Good Luck!

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