It is axiomatic that divorce is an emotional process. Samuel Johnson summed up domestic life best when he wrote, “To be happy at home is the ultimate result of all ambition.”

One of the great challenges of representing clients going through this highly emotional chapter of life is that their focus tends to be on the present. Certainly, there are many daily issues that do merit attention. We live day-to-day. But, when I do an initial interview with a client, two of the questions I try to focus on are: (1) how many years does this client have until their productive (i.e., income producing)  life will end, and (2) how is the client suited to prepare for that day?

These issues have become more acute over time. When I began working as a divorce lawyer in the 1980s, some elements of life seemed fixed. Retirement was at age 65. Most clients aged 40-60 either had stable employment or were married to spouses who had stable employment. Stable employment meant mid to long-term employment in a stable industry for a stable business. All of that has changed.

Today I am meeting with people who have not reached 50 who report that they are concerned about whether their employer will still exist another decade or whether they will survive as employees. What has changed so dramatically in the past decade is that it is often the most senior business executives who are talking about such vulnerabilities. Many of these people have very solid retirement assets today, but they have job insecurity. When we explore that issue, these often highly talented people are seeing a future as consultants working spasmodically or experiencing long periods between jobs.

The September 4, 2018 edition of the Wall Street Journal focuses on a subject too often forgotten in the divorce process. How will we prepare for a retirement in an age when we may find ourselves effectively “retired” years before we expected it?

As the Journal article correctly observes, financial needs in retirement have been more the subject of “convention” than actual study.  The conventional wisdom is that we will need 70% of our final annual income in retirement. The financial services industry has promoted 80% for reasons that are self-evident. The Journal article by Dan Arierlt and Aline Holzwarth challenges these assumptions and correctly observes that all of us whether going through divorce or not, can actually do the necessary homework ourselves. It can be uncomfortable work, but it is highly necessary work.

Realize first that many of us are being forced to pull down retirement assets long before we expect. That can be caused by unusual life events or even something as simple as being terminated while a loan is outstanding on one’s qualified retirement plan.

The starting point is to look at what retirement mechanisms are out there. Social Security is the most ubiquitous and the same issue of the Journal contains an article debating the merits of taking that benefit at 62 in contrast to normal retirement (roughly 66) or deferring to age 70. Then some of us still have defined benefit plans or annuities, which will begin to provide monthly income for life. Finally, we turn to the defined contribution accounts, whether IRAs, 401k’s or 403B plans. With these accounts, the question revolves around how and when to draw. The goal of that game is to die while still solvent although an increasing number of Americans are dying in significant debt.

The Journal article notes and we have observed that many people launch into retirement having lost their regular salary but acquired an additional 8-10 hours a day on their hands with not much to do. Many of us dream of time to golf or attend the theater. Golf is a $40 a day activity. Broadway is a bad example, but the average ticket is over $100. Still want to see your pro sports team live?  Baseball $40 a day. Pro football is Sunday only but $172 for the ticket alone. Most of us do not really consider downsizing things like auto purchases and we now have 365 days a year to visit Florida in winter or friends and family the rest of the year. In short, we have witnessed clients who retired at 65 with $700,000 in retirement who seem to think they can maintain a $6,000 a month lifestyle. They can, so long as they don’t plan to live more than 10 years.

The article encourages people to actually wander into the weeds of these mundane daily costs while acknowledging that things like uncovered medical and long-term care expenses are unknowable given the state of our health care system. But, the article does not pay sufficient attention to what I will call the “core expenses” Will you retire with a mortgage and if so when will it be retired? Can you really afford to live in the home you have grown to love and nurtured with 30-40% of your pre-retirement household income?  The answer may be yes but the price may be a golf membership or the annual pilgrimage to the seashore. People don’t like to make these choices but you risk burning through your retirement too quickly unless you assess costs. Keep in mind as well that as you grow older, some things you do yourself like mowing lawns or cleaning windows and gutters will have to be outsourced unless you want to budget for some inpatient rehab when the hip breaks.

The other area not discussed but an area of high vulnerability for retirees is unbudgeted “child needs.” As attorneys, we have seen divorce clients who had large portions of their savings dispersed to subsidize a child’s drug rehabilitation, criminal defense or creation of a new business enterprises, built more upon hope than expectation. Their children have effectively made a once secure retirement far less secure. The parents providing these resources underwrite these or even more frivolous expenses (e.g., family vacations), ignoring the fact that as retirees, they have no ability to replace spent assets.

The electronic version of the article links to an Excel spreadsheet that identifies expenses by categories. Anyone contemplating retirement needs to look at that budget. A similar one can be found on the Pennsylvanian support rules by clicking on Income and Expense Statement.

Retirement is an uneasy subject especially in a world where the vagaries of employment may leave us retired long before we expect. But we need to look carefully at a day when we cannot replace what we consume with additional labor. And, in my world, we also deal with taking a retirement that might comfortably support two people in one household, which becomes stretched beyond normal limits because divorce has now taken a common resource and demanded it support two independent homes. The truth is that we are living a long time; a fact underscored by watching 106-year-old Roberta McCain bury her octogenarian son. Therefore, whether you are enduring a divorce or just thinking about your future, those thoughts need to focus on what you will need in the years ahead and how you will “mind the gap.”

The recent changes in tax laws have grabbed the headlines but employees of the four branches of the military and the Coast Guard will become part of a new “blended” retirement system passed by Congress in 2016, but effective in 2018.

The 20 or nothing system by which those in service had to stay in service for a generation in order to get any retirement has been modified. The 20 year benefits are reduced by about 20% but that remains the “full retirement” option.  Being added is a defined contribution plan with a match and a continuation bonus after 12 years of service.  In a sense, the new system is more humane as 80% of those who opted for a career in the military did not reach the 20 year mark and then departed without any form of retirement.

Those who participate in the defined contribution plan the government will match 4% of contributions and contribute 1% directly to the account.  Participants vest after two years.

Current employees with 12 or more years can stay with the existing system or opt for the new defined contribution plan by which they will receive 40% of salary after completing 20 years.  If they do remain in the old system, they will receive 50% of final pay as a retirement but they will need to reach the 20 year mark to receive that amount.

The system was changed to reduce government pension obligations and recognize the fact that 4 out of 5 people in the military don’t ever qualify for retirement and some saw the absence of any retirement vehicle other than “20 or nothing” as a reason not to choose a military career in the first place.