While the stock market has focused on the light at the end of the tunnel that is COVID-19, many of us are still feeling our way through the tunnel. Many of us are tunneling with a marriage partner — which in some cases is a blessing and in others has been the last straw in the relationship.
The BBC reports that divorce rates are increasing around the world, and “the pandemic-induced break-up curve may not have peaked yet.” 1 According to the same article, isolation with another person tends to bring the relationship into sharp focus, magnifying differences.
Job losses, which there were many of this year, can exacerbate money and role stresses, a fraught area for many couples even in normal times. Negotiation on spousal contribution can add tension: Who should educate the kids while trying to work? Is the division of labor fair?
For couples preparing financially for divorce, the dark tunnel of this COVID year may have provided some financial bright spots.
Moving from one home to two can be expensive. However, current low interest rates can be enormously helpful. As an example, a 2.5% 30-year mortgage requires the following surprisingly affordable payments (principal and interest).
- $100,000 mortgage: $400 payment per month
- $250,000 mortgage: $600 payment per month
- $500,000 mortgage: $2,000 payment per month
Low interest rates are also a benefit when borrowing again home equity.
Many investment (stocks and bonds) values are high, meaning there is more money to work through the transition and more to help you get started in your new life. Work with your CPA and financial advisor to determine which accounts to tap.
- The contributions you invested in a Roth IRA may come out tax free.
- You may be able to borrow against your 401(k).
- If you receive a 401(k) from your partner, you may be able to take withdrawals with no penalty.
If you need cash for legal fees or other transition expenses, it is a benefit to sell investments while they are high. Yes, they could go higher, but today’s values (Jan. 4, 2021) for many investments are attractive. We feel it is a good time to raise needed cash.
A flexible environment
Many employers are getting more comfortable with at-home work. For a single parent, this can reduce commutes, make daycare pick-up easier and facilitate child exchanges with another parent.
You can work with your attorney or other experts, and even the court, virtually. This can save travel time not only for you but also for the professionals you retain – which saves you money.
Sometimes, there is a light at the end of the tunnel. If this past year has signaled the end of your marital relationship, take heart. The avenues for preparing financially for divorce may be smoother now than ever.
1. Why the pandemic is causing spikes in break-ups and divorces. BBC, Maddy Savage, December 6, 2020.
Laura is a Senior Wealth Manager and the Founder of LWP. She has a master’s degree in tax and is an excellent listener. While she is a sophisticated financial planner with experience in complex issues, her priority is ensuring a financial plan works for people.