The emotional turmoil of divorce can be used as an opportunity to secure clients’ financial futures, advisor Marilyn Timbers says.

Providing sound financial advice, while no cure for a broken heart, can help alleviate some of the burdens of divorce, especially if clients have little experience with financial planning, says Timbers, a retirement coach at Voya Financial Advisors.

“It’s important for a person who has recently gone through divorce to sit down with an an advisor and draw up a plan for their individual goals,” says Timbers. “If you’re working with a client that has been less dominant in the financial side of the relationship, it first becomes a matter of taking a step back and educating them about all aspects of financial planning.

Timbers offers five tips for advisors helping divorced clients to address their retirement savings.

1. Make sure the retirement plans are divided according to the divorce agreement.

This issue is twofold: making sure that all of the parties in the divorce have a holistic understanding of how much money is in each partner’s nestegg and that the retirement accounts are fairly divided. These tasks are most often handled by a forensic accountant and the clients' attorneys, but an advisor should help make sure that all assets are distributed in accordance with a qualified domestic relations order, or QDRO, which is the plan created in divorce court to split retirement assets.

Under a QDRO, a portion of an ex-spouse's 401K is rolled over into a client's IRA. Before the rollover takes place, however, a client under age 59 1/2 may elect to distribute some or all of the money directly to themselves without incurring a 10 percent early withdrawal penalty. Doing so might be helpful for recently divorced clients experiencing cash flow disruptions, seeking new residence or vehicles or struggling to pay legal fees.

“It’s also important to note the one-time opportunities to withdraw money from an ex-spouse’s retirement plan without paying the 10 percent [early withdrawal] penalty,” says Timbers. “Oftentimes clients need to withdraw due to expenses related to divorce. Granted, they’ll pay taxes, but they won’t be subjected to the penalty.”

2. Change the beneficiary on clients’ retirement accounts.

It’s up to the advisor to follow up and make sure that an ex-spouse is no longer the beneficiary after a divorce, if that is what the client wishes.

“I think we would be surprised at how often clients neglect this step,” she says. “I would say that it is prudent to do an audit of all retirement plans and life insurance policies to review how the beneficiaries are structured.”

3. Review clients’ Social Security options.

Clients are often unaware that under certain conditions, they can claim their ex-spouse’s benefits, says Timbers. If a divorced client was married to their spouse for at least 10 years, and did not re-marry prior to age 60, then they can collect Social Security based on an ex-spouse’s work record.

“We often come across situations where clients believe that claiming based on their ex-spouse’s work record would reduce their ex-spouse’s benefits, and that’s not the case,” says Timbers. “This is an advantage that the client should be aware of.”

4. Review and re-establish retirement goals.

Because planning for an individual’s retirement is different from planning retirement for a couple, divorce provides an opportunity to create a new plan, Timbers says. Divorced clients may want to retire earlier or may not be able to save as much, requiring new strategies to reach their financial goals, she says.

“Creating a new plan is very important,” she says. “A lot of the facts surrounding the client’s situation have changed. Couples can have differences in age, which results in a different investment horizon or different household expenses to plan for in retirement.”

5. Reassess clients’ investment allocations.

For divorced clients, especially women, it’s important to review investment allocations to make sure they are still suitable and in the best interest of the client, says Timbers, particularly in cases where the ex-spouse strongly influenced the asset allocation.

“Oftentimes they find that their investment allocations are based more on their ex-spouse’s risk tolerance than their own,” says Timbers. “Maybe their goals are different, the timeline for retirement has changed or they find that their financial outlook is different than when they were a couple.”