Investment 101 for the Newly Divorced

• Is my ex entitled to investments in my name?
• 5 tips for building wealth after divorce
• What are the best investments for a person my age?
• FAQ

When a couple divorces, their assets – including their investments – are usually divided according to the property division laws of their jurisdiction or any prenuptial or postnuptial agreement in place.

Divorce laws include two types of property division which vary by state: community property and equitable distribution. In community property states, all assets acquired during the marriage are typically split 50/50. In equitable distribution states, assets are divided based on fairness, which may not always mean a 50/50 split.

Your investments can encompass a broad range of assets, from real estate and retirement accounts to stocks and bonds. These are considered marital property if they were acquired or increased in value during the marriage, regardless of whose name is on them.

Retirement assets are usually split in divorce, but you may have to complete a qualified domestic relations order (QDRO) first. Learn about QDROs here.

Is my ex entitled to investments only in my name?

It depends. If the investment was made during the marriage with marital funds, it's likely to be considered marital property and subject to division, even if it's only in your name. However, if the investment was made before the marriage or with separate funds, it might be considered separate property.

5 tips for building wealth after divorce

You may feel stressed about money post-divorce, but think of it this way: This life event is an opportunity to redefine and rebuild your wealth. You’re getting a new life, so why not a new budget?

Here are a few tips to help you on this new journey:

1.  Reevaluate your budget. Your income, cash flow, and expenses have likely changed. Adjust your budget accordingly to avoid unnecessary debt and to start saving.
2.  Invest in yourself. Consider furthering your education or acquiring new skills. This could lead to higher earning potential.
3.  Start saving. If you haven't already, start an emergency fund. Aim to amass at least three to six months' worth of living expenses in your bank account or another safe place.
4.  Don’t forget retirement planning. The division of your marital assets may have decreased your retirement savings. It’s crucial to reassess your strategy. Maximize contributions to your retirement accounts when possible.
5.  Diversify your investments. Don't put all your eggs in one basket. Diversify your portfolio to spread risk. If you don’t want to do this alone, don’t; lots of people work with financial planners or investment advisors who charge minimal fees for their expertise.

What are the best investments for a person my age?

While it's never too late to start investing, your personal finance approach should be influenced by your age bracket.

Below, you will find some general guidelines. These should not be misconstrued as financial advice. Consult with a financial professional to create an investment strategy that suits your needs and circumstances. The path you take should reflect your goals, risk tolerance, and time horizon.

20s

At this age, you have the advantage of time. This allows you to recover from potential losses and benefit from compound interest. Generally speaking you can afford to take more risks. You might consider investing in growth-oriented assets like stocks or exchange-traded funds (ETFs). Also consider starting to contribute to a retirement account such as a 401(k) or an IRA.

30s

Your 30s are a time when you might be balancing multiple financial goals such as home ownership, raising a family, and saving for retirement. Diversification becomes key. You can continue investing in stocks, but also consider investing in bonds for stability. If available, maximize your employer's match on your 401(k).

40s

As you approach mid-life, you may want to strike a balance between risk and security. Continue diversifying your investments. You might consider a mix of stocks, ETFs, bonds, and perhaps real estate. Also, review your retirement plan to make sure you're on track.

50s

In this decade, retirement looms closer. It's time to focus more on preserving wealth while still achieving growth. A larger portion of your portfolio might be in bonds, and there may be fewer riskier stocks. Review your retirement accounts to make sure they're well-funded.

60s

As you enter your 60s, the focus often shifts to income-generating investments that can support you during retirement. Bonds, dividend-paying stocks, and annuities can be good options. This is also a time to reassess your risk tolerance and possibly shift toward more conservative investments.

70s+

At this stage, the focus is typically on preserving capital and generating income. Investments like bonds, CDs, and high-dividend stocks can be beneficial. Consider working with a financial advisor to make sure your investments align with your estate planning goals.

FAQ about investments after divorce

Can my ex-spouse claim my 401k years after divorce?

Generally, the division of assets, including a 401k, is determined at the time of the divorce and documented in the divorce decree or marital settlement agreement. Once this is finalized, your ex-spouse shouldn't be able to make additional claims on your 401k years later.

However, if your 401k was divided as part of the divorce settlement, they may have a rightful claim to a portion of it. As always, specific circumstances can affect this. It's best to consult with a legal professional for advice tailored to your situation.

Can I sell investment accounts after divorce?

Yes, you can sell your investment accounts after a divorce. However, it's important to consider the potential tax implications, as selling investments can trigger capital gains taxes. Also, selling should align with your overall financial goals and strategy post-divorce. If you're unsure, consider consulting with a financial advisor to understand the best course of action for your unique circumstances. Remember, your decisions now will impact your financial future, so it's crucial to make informed choices.

At Hello Divorce, we offer CDFA services at a flat rate to help people figure out if they're on track financially – and if not, what they can do to fix their course. To learn about our CDFAs or other services, we invite you to schedule a free 15-minute phone call with a friendly account coordinator.