Divorce tips for financial security

Apart from the emotional upheaval that comes with ending a marriage, if you're getting a divorce, you have a lot to think about when it comes to handling your finances.  

Divorce rates for Americans over 40 have been rising since the 1990s and have doubled for couples over 50. A late-in-life divorce presents a particular set of issues for those nearing retirement age, when a major income shock can greatly reduce the ability to save enough to retire comfortably.  

Know where you stand financially

Before seeking a divorce, take stock of your finances: income, assets and a budget for new expenses. In many households, things like handling financial accounts are handled by one spouse. While most financial experts recommend both partners understand household finances, often it falls to one more than the other to take care of those tasks -- which can set the stage for a difficult divorce. It may be helpful consult with legal and financial professionals to determine what steps to take first. 

The unequal division can especially be a problem for women. "Women ... often haven't been making those types of saving and investment decisions. They've divided the labor so they have been doing other things. It's a horrible time to try to learn that, and so a lot of women at that point find themselves in a difficult situation financially without the practice," Mariko Chang, author of "Shortchanged" told CBS MoneyWatch.

"Women are just as great at managing money," he said, "but a lot of it comes from education and from practice and having the knowledge and the confidence."

Focus on necessities first

A big part of splitting up is knowing where you'll live. Do you own a home together, and if so, will you or your spouse plan to keep the house in the settlement? 

Keeping the house may sound like the better end of the deal, but it can be expensive. From mortgage payments to maintenance costs, you'll need to calculate whether you can handle the carrying costs on your income.  

But before making that decision, look at the costs of purchasing or renting another home. Even if you're the higher-earning spouse, if you're paying alimony or child support, that will be factored in when you apply for a new mortgage, and it may affect your credit and ability to qualify

"A big issue in our area is around the family house. Housing prices have gone up a lot ... and I'm seeing more and more situations where couples decide to continue joint ownership of the primary house until the kids are out of school," financial adviser Raquel Hinman told CBS MoneyWatch.  

"The problem is that the couple is still financially tied to each other (beyond support), and a lot of the issues that were in the marriage will keep coming up in managing a property together. If they really want to do that, they need to have a really tight agreement that anticipates issues that could arise -- home improvements, property taxes, etc.," Hinman said.

Another expense to consider? Health insurance. If you're under age 65, you won't be eligible for Medicare. If you currently have health insurance through your spouse's plan, you may be able to continue via COBRA benefits for up to 36 months. Your premium payments under COBRA will likely be more expensive because you won't have an employer shouldering a piece of the burden. 

Future of your retirement

Longtime homemakers may not qualify for Social Security benefits if you were in the workforce for less than 10 years. But you may qualify for half of your spouse's benefits, if you were married 10 years or more. Applying won't reduce the amount of benefits your former spouse receives, nor will he or she be notified. 

If you're eligible to receive a portion of your spouse's retirement contributions to a workplace plan like a 401(k), you'll need an attorney to create a "qualified domestic relations order," or QDRO, to help divvy up the funds. 

The spouse receiving benefits can roll them into an IRA or even take a distribution without penalties for withdrawing money early. But you should carefully consider the consequences of moving that money out of a retirement account. Keeping the funds specifically for retirement can improve financial security later on in life.   

The most important thing, financial adviser Melissa Ellis said, is to carefully go over any settlement before signing. 

"Make sure that the settlement is equitable, meaning that one spouse doesn't end up with the higher-taxed items," Ellis told CBS MoneyWatch. "Look at liquidity. Make sure what you have is just as liquid as what the other person is going to have. Make sure [you] are in a good position before the divorce."