The unfortunate reality is that divorce is likely for nearly half of couples: Research shows that 41% of first marriages end in divorce. While reaching a divorce agreement can feel like a significant milestone, it's often mistaken as the final step.
Once an agreement is signed, most will let out a sigh of relief, put their marital settlement agreement (MSA) in a drawer, and think they are done working on their divorce. Unfortunately, the finish line hasn't yet been crossed.
While there is more work to be done, post-divorce means you no longer have to negotiate with your ex-spouse, and you will begin to make your own decisions. This may seem daunting at first, but you will quickly get the hang of it and experience a sense of new financial freedom.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
To help you navigate this transition with clarity and confidence, here are five steps to take after your divorce is final to make sure your hard work isn't for naught and your MSA is implemented.
1. Hire a financial planner who specializes in working with divorced people
A recent study found that almost 95% of women in the U.S. do not consult a financial professional during divorce. Those who take on all post-divorce needs themselves tend to experience missteps, such as:
- Not getting assets retitled
- Losing money if the markets are volatile or proper paperwork is not processed
- Suffering unnecessary tax consequences
- Not knowing if they are making sound financial decisions
To avoid these mistakes, I recommend working with a Certified Divorce Financial Analyst (CDFA™), as these professionals are held to a fiduciary standard and have experience in this process.
2. Divide your joint bank accounts and then close the accounts
Work with your bank and ex-spouse to transfer the agreed-upon dollar amounts to each of your individual bank accounts and close all joint accounts. Open new accounts if necessary.
It is essential to remember to review accounts for any recurring payments, automatic payments and direct deposits.
For additional savings, consider leveraging online bank accounts, which have lower operating costs and can pay higher yields.
3. Consolidate investment accounts with your new financial planner
If you choose to move forward with a new financial adviser, you will need to transition your accounts under their management.
While your new adviser will try to consolidate accounts, it is common to need more than one account, as the titling determines how the account is taxed.
For example, you may have a traditional IRA and a Roth IRA, as well as taxable accounts titled in your name or in the name of your trust.
It's also important to note that 529 plans only allow one owner. If it is decided that your ex-spouse will be the owner of this account, make sure to either receive duplicate statements or get online access while you are wrapping up the divorce.
4. Submit QDROs to plan administration and roll over your portion to an IRA
A Qualified Domestic Relations Order (QDRO) applies specifically to qualified retirement plans that are governed by the Employee Retirement Income Security Act (ERISA). This is a separate document from your MSA, and the most common plan types are 401(k)s and 403(b)s. It has two main uses:
- You avoid a 10% penalty on early withdrawals if you are under age 59½ and need to make a withdrawal for current cash needs.
- You are awarded a portion of your ex-spouse's qualified retirement plan. This is how it gets moved into an alternate payee account, which gives you full control and removes access to it by your ex-spouse.
The plan administrator has the sole authority to approve the QDRO. Ideally, this should be submitted to the plan for review and approval before it is submitted to the judge.
I highly recommend hiring an attorney who specializes in QDROs. They generally charge a relatively inexpensive flat fee.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
5. Set up a tracking system for expenses
Studies suggest women's household income generally drops between 23% and 40% in the year after a divorce. And regardless of how you look at it, two homes will always cost more than one.
Anticipate new expenses, which is why it is essential to have a solid understanding of your spending to help stay on track with your financial plan. Here are two options:
- Excel spreadsheet. You can export your statements from your financial institution's websites. You will need to review how they have organized categories and sort them to your liking.
- Choose a budgeting app or website that links to your financial accounts, so that transactions automatically download. You will need to review and re-categorize some expenses. They typically offer various reports, making it easy to track your spending over time.
While these steps should help move you in the correct direction post-divorce, it's essential to remember that establishing a new routine typically takes a couple of years.
You don't need to have all your future goals, dreams and hopes figured out at this point. Your adviser will know what questions to ask to help you start to build out the possibilities of what you may want life to look like.
The goal is to start narrowing the range, so you have a target to move toward. Don't forget that your financial plan is a living document you should revisit annually to make sure that it remains aligned with your evolving circumstances and goals.
Divorce can be a long and stressful process. Those who flourish after their divorce are open-minded, look forward to the future and have a good understanding of their finances and what lifestyle can be sustained.
If you are considering a divorce, in the midst of a divorce or wrapping up the divorce process, consider reaching out to a Certified Divorce Financial Analyst today to help you plan for your next chapter.
Hightower Advisors, LLC is an SEC registered investment adviser. Registration as an investment advisor does not imply a certain level of skill or training. Securities are offered through Hightower Securities, LLC, Member FINRA/SIPC.
Related Content
- Five Divorce Settlement Blind Spots: An Expert's Guide to What You Can't Afford to Miss
- What to Do as Soon as Your Divorce Is Final
- How Finances Are Split In a Gray Divorce
- How Much Will Getting Divorced Cost You?
- What Happens to Debt in Divorce?
-
Crypto Trends to Watch in 2026Cryptocurrency is still less than 20 years old, but it remains a fast-moving (and also maturing) market. Here are the crypto trends to watch for in 2026.
-
Original Medicare vs Medicare Advantage Quiz: Which is Right for You?Quiz Take this quick quiz to discover your "Medicare Personality Type" and learn whether you are a Traditionalist, or a Bundler.
-
Ask the Editor: Capital Gains and Tax PlanningAsk the Editor In this week's Ask the Editor Q&A, Joy Taylor answers questions on capital gains tax rates and end-of-year tax planning
-
4 Smart Ways Retirees Can Give More to Charity, From a Financial AdviserFor retirees, tax efficiency and charitable giving should go hand in hand. After all, why not maximize your gifts and minimize the amount that goes to the IRS?
-
I'm an Insurance Pro: If You Do One Boring Task Before the End of the Year, Make It This One (It Could Save You Thousands)Who wants to check insurance policies when there's fun to be had? Still, making sure everything is up to date (coverage and deductibles) can save you a ton.
-
Should You Tap Your Home Equity Before 2026?As borrowing rates and tax law shifts converge, here's what homeowners need to know before pulling equity out of their home.
-
'Politics' Is a Dirty Word for Some Financial Advisers: 3 Reasons This Financial Planner Vehemently DisagreesYour financial plan should be aligned with your values and your politics. If your adviser refuses to talk about them, it's time to go elsewhere.
-
For a Move Abroad, Choosing a Fiduciary Financial Planner Who Sees Both Sides of the Border Is CriticalWorking with a cross-border financial planner is essential to integrate tax, estate and visa considerations and avoid costly, unexpected liabilities.
-
21 Money Moves Smart People Are Making Before 2026These steps can help trim your tax bill, boost your savings, lower your health care costs and set you up for financial success in 2026.
-
A Financial Adviser's Guide to Divorce Finalization: Tying Up the Loose EndsAfter signing the divorce agreement, you'll need to tackle the administrative work that will allow you to start over.
-
Uber Takes Aim at the Bottom Lines of Billboard Personal Injury LawyersUber has filed lawsuits and proposed a ballot initiative, in California, to curb settlements it claims are falsely inflated by some personal injury lawyers.
