Navigating Retirement Amidst a Life Transition
Case Study
The Client: Anne
Ages: 60
Professions: Non-Profit Director.
The Situation
Anne was in the midst of a divorce after a 30-year marriage. The retirement plan she and her husband had built together was no longer relevant, and she was now solely responsible for her financial future. She was set to receive half of her husband’s 401(k) via a QDRO (Qualified Domestic Relations Order) and half of their joint brokerage account. She was also keeping the family home, which was paid off but had a very low cost basis. She felt overwhelmed and unsure if the retirement she had planned was still possible.
Her Key Questions
My attorney is handling the legal split, but who will help me figure out what to do with all these assets after?
What is a QDRO? Where do I put that money, and what are the tax implications of getting it?
Can I still afford to retire in a few years as I’d always planned?
I’m keeping the house, but are there hidden tax costs I’m not seeing? Can I afford the upkeep on my own?
How do I even begin to create a new financial plan that is just for me?
Our Process & Solution
Collaboration with Legal Team
Our first step was to collaborate with Anne’s divorce attorney. We analyzed the long-term financial and tax implications of the proposed settlement, particularly concerning the house (future capital gains) and the 401(k) split, providing crucial data for her legal team.
Asset Consolidation & QDRO Execution
We guided Anne through the complex process of executing the QDRO, allowing her to roll over her share of the 401(k) assets into a new, personal IRA, all as a tax-free transfer. We also helped her set up a new individual brokerage account to receive her share of the joint investments.
“New Reality” Financial Plan
We built a brand-new financial independence projection from the ground up, based only on her assets, her new budget, and her individual goals. We analyzed her Social Security claiming options (including her ability to claim on her ex-spouse’s record) and ran projections to show her exactly what her new retirement timeline looked like.
Cash Flow & Property Analysis
We ran a detailed analysis of her “house-rich” situation, modeling the ongoing costs of property taxes and upkeep versus the potential tax implications of selling it now versus later, allowing her to make an informed, non-emotional decision.
The Outcome
Anne moved from a place of overwhelming uncertainty to one of empowerment and clarity. She successfully navigated the financial complexities of her divorce, avoiding common tax pitfalls. She now has a consolidated portfolio and, most importantly, a new financial plan that is entirely her own, giving her the confidence to move forward into her planned retirement on solid ground.