Help! I’m getting divorced, will I run out of money?
Issues & Concerns
Elizabeth was 51 when we first met her. She’d been married for nearly 25 years and had two children at university. Whilst she’d had a career early on, she hadn’t had a “proper job” since having and bringing up their children. Now she was getting divorced, the family home was being sold and she was getting a ‘pension credit’ from her husband’s company scheme.
Elizabeth was the first to admit that she was overawed by being on her own, all the decisions she was suddenly having to make and whether she would have enough money in future.
After discussion we established what was important to Elizabeth and what would give her peace of mind. She wanted a property large enough for her children to visit, access to a stable source of income and the reassurance that she would not run out of money in her old age.
We ran through a lifetime cashflow plan and modelled various scenarios. This detailed a number of possibilities including retraining and restarting her career. Using our specialist software, we could clearly demonstrate how she could live a comfortable life both before and after retirement.
For Elizabeth having a trusted adviser or “someone to put her on the straight and narrow” was very important. The financial plan allowed her to clearly see that she would not run out of money (although she would have to monitor levels of expenditure). It helped us to understand what Elizabeth wanted and how best to divide and invest her divorce settlement to best suit her needs.
We used the ‘pension credit’ to invest in a low risk pension plan that will allow her to draw a flexible pension from age 55 onwards. We also invested a lump sum into and ISA and an ‘ISA feeder account’. We also made sure that she had a healthy cash buffer for ‘rainy day’ events and to pay for holidays with her children.
We work regularly with Elizabeth to provide reassurance that the plan is working. We monitor her pension and investments and make sure that the cash ‘rainy day’ fund is topped up when necessary. She has retrained and now enjoys working part time. She still has access to a supplementary income that, to date, she has not needed. Elizabeth’s children have now graduated and are both working. I’m delighted to say that Elizabeth now has a new partner (although we can’t claim any credit here!) and things are much brighter and happier for her.
By Simon Ainley, Chartered Financial Planner