Going through a divorce can be an emotionally and financially difficult time. With major life changes underway, investment decisions can seem overwhelming. This article looks at tips for navigating investing with a pending divorce in 2020, with a focus on planning ahead, seeking legal and financial advice, and avoiding rash decisions.
Understand how divorce affects investment assets
Divorce often necessitates dividing up investment assets like retirement accounts, stocks, bonds mutual funds between spouses. Seeking legal advice on how these will be split is essential, as some accounts may have ownership and beneficiary implications. Getting clarity on division of assets ahead of finalizing divorce can help enable better investment decisions.
Have an investment risk management plan
Major emotional and financial transitions with divorce can understandably make one more hesitant towards investment risks. However, excessive risk aversion could lead one to shift heavily towards cash, losing out on portfolio growth over the long run. Having a sensible risk management plan accounting for changed circumstances can help balance investment risks.
Avoid liquidating investments in a panic
Liquidating investments prematurely due to panic in midst of divorce proceedings can lock in losses and derail future portfolio growth. While having enough liquid cash buffer is prudent in transitions, assessment of factors like time horizon, goals, and risk tolerance is still needed before liquidating investment assets.
Consult a financial advisor
Navigating investments amidst complex personal situations like divorce requires expertise. Speaking to a professional financial advisor to understand specifics of one’s changed financial situation post-divorce rather than relying on general rules-of-thumb alone is usually very helpful.
In summary, divorce-related investment decisions require planning ahead on division of assets, balancing risks suitably, avoiding panicked liquidation of investments, and seeking legal and professional financial advice specific to one’s changed situation and life stage needs.