7 Little-Known Financial Benefits of Divorce

There are several financial benefits of divorce that you might not see people talking about. Yes, while an unpopular opinion, this is true.

Money is almost always a factor in marital strife and a leading cause of family breakdowns and divorce. Sadly, a divorce doesn’t solve the money problem. And in most cases, it just compounds it, especially for people who may not have significant income. 

In most family settings, bills are split between both couples’ incomes, making them easier to manage. After divorce, however, each party has to handle their bills separately, greatly impacting individual finances. 

However, not every aspect of a divorce has a negative effect on a divorcee’s finances. So, what are these positive aspects of a divorce that help you financially?

Hi In today’s blog, these are some of the things that I will be talking about. So, if you want to know the little-known financial benefits of divorce, keep reading till the end, and thank me later…

Financial Benefits of Divorce That You MUST Know About!

While it is true that divorce can lead to a lot of financial worries, there are times when separating your paths can be the main source of positivity and happiness. Yes, you read that right!

Here are some of the lesser-known financial benefits of divorce that you should know about:

Increased Control Over Your Money and Budget

Being in a marriage means having two people make decisions about how they spend their money. Also, it means that both may have different priorities, spending habits, and saving cultures. This can be the root cause of all their money fights. 

After a divorce, you only have your ideas to implement. This can eventually make a massive difference if you are the more spending and saving-conscious spouse in a relationship.

People married to people with spending problems find it relatively easy to start saving and investing after divorce. To them, the divorce may be the best financial decision they have ever made.

Early Access to Retirement Savings

Under normal circumstances, you can only access retirement savings from your 401 (k) or IRA (or the ones under ERISA) once you reach the retirement age set at 59 and a half. If you must, you must pay a 10 percent penalty. 

Divorced couples can withdraw money from their retirement accounts early without paying an early withdrawal penalty, but only if they have reached a pre-agreement known as a qualified domestic relations order.

Still, it is not advisable to pull money out of your retirement fund unless necessary, such as if you want to tap into the resources to start a money-generating venture.

Kids Can Access More Funds for College Education

College education is a big concern for most parents, and it becomes an even more significant concern after a divorce as there is no more pooling of resources.

The good thing is that the federal government supports needy students with financial aid through initiatives such as Free Application for Federal Student Aid (FAFSA). 

When a child is in a family setting, they are required to enter the incomes of both parents in the FAFSA form.

When the parents are divorced, they are only required to enter the custodial parent’s income, child support, and alimony paid by the non-custodial parent.

If the economic situation for the custodial parent is less stable, the kids can access more federal funds through grants and loans. 

Social Security Benefits

“Gray divorces have seen quite a spike in the last few years. This term describes divorces among older adults who choose not to spend their golden years with their spouses,” says attorney Shawna Woods of Atlanta Divorce Law Group.   

For married couples, a spouse must wait until the contributing spouse turns to social security to get their spousal check, which can, at times, mean waiting until they are 72.

Divorced couples that are over 62 and have been married for over ten years do not have to wait. Also, claiming the benefits early won’t affect your ex’s monthly payments or the benefits of their new partner if they decide to remarry. 

Reset Financial Priorities

Next on the list of the financial benefits of divorce is the fact that a legal separation gives you the opportunity to sort your finances and reset your financial priorities.

Think about it: You are no longer associated with your partner legally (unless there’s a case of child custody). Your finances are different. And so are your financial priorities. Therefore, you can use our finances in any way you want.

You are free to make your financial decisions yourself. Be it big ones, like giving up a house, or the small ones, like planning a vacation. You are your own dictator.

Better Investment Returns

This is a case that is especially true for women. According to Mela Garber, who works as a tax leader at Anchin Private Client in NYC, divorce leads to a better ROI for women. This is primarily because men are the ones who usually take more risks when it comes to investing.

Divorced women who are managing their own finances and taking a conservating approach are more prone to making sensible asset allocations in the market.

In other words, after divorce, women have the financial independence to make a decision about investment. and in mist cases, these benefit them greatly!

Improvement in Credit Score

Finally, a divorce can help you financially to improve your credit score. and hear me out before you get confused.

People in a marriage generally have a joint account. And in such cases, it is very easy for them to forget about the joint debt that they hold.

For example, let’s say that your name is linked to those accounts. In case of any financial debt your ex-partner might have, it will also reflect on your credit score.

After a divorce, the first thing that most people do is to remove and separate their joint account. And this is one of the financial benefits of having a divorce. In other words, if your ex-spouse misses a payment, your credit score will not drop.

Bottom Line: Choose Your Options Wisely!

The breakdown of a family through a divorce is challenging for all parties involved. But it also presents an excellent opportunity for resetting priorities and finances.

So, in case you were thinking about getting a divorce, it is time that you start looking at the financial benefits of the same!