Planning for Insurance and Retirement After Divorce

A divorce throws all sorts of things into chaos. As though recovering from the emotional devastation of ending a marriage was not enough, as a recent divorcee, you will have to spend a significant amount of time rebuilding your financial arrangements to suit your new life as single people.

Some of these changes are more pressing than others. If you are going through a divorce, you will want to address your insurance and retirement needs as soon as possible.

Find New Health Insurance

If you were covered under your own employer-sponsored health insurance policy during the marriage, you may not have to change much. However, if you were covered under your spouse's policy, you will need to find new coverage.

Employer-sponsored spousal coverage terminates on divorce. If you need to, you can seek a temporary extension of that policy through COBRA. However, COBRA is very expensive and you will have to pay the full premium yourself. It is a good idea to find individual coverage as soon as possible.

Your kids, however, are a different story. After a divorce, children are still entitled to coverage under a parent's policy, even if that parent does not have primary child custody.

Consider Your Life Insurance Needs

Life insurance is another important consideration. During the marriage, you and your spouse probably had life insurance policies that would provide compensation if one of you died. After the divorce is finalized, you may want to consider changing the beneficiary on your life insurance policy.

However, the fact that you are no longer married may not be a good enough reason to terminate your coverage. If you are depending on your ex for financial support, you could wind up in a dangerous situation if he or she dies or becomes unable to work.

Insurance coverage issues should be dealt with the final divorce agreement. Your divorce lawyer can help you craft a solution that best fits your individual needs.

Plan For Your Retirement Goals

Retirement is also a major issue, especially if you are one the thousands of couples who divorces in late middle age every year.

You will be entitled to Social Security retirement benefits based on your spouse's income if you were married for at least 10 years and the benefits based on your own income would be less than those based on your spouse's. Your receipt of benefits does not lessen your spouse's benefits in any way. You will, however, lose eligibility if you remarry.

Of course, Social Security benefits are only a small part of most people's retirement plans. Most private retirement accounts-like 401(k)s and IRAs-will be divided as marital property during a divorce. Talk with your attorney to make sure this issue is resolved in a way that supports your retirement goals.