Recently, on an episode of my radio show, “Your Money,” I spoke with Lawrence J. Kotlikoff, a professor of economics at Boston University and an acclaimed personal finance expert. Larry is a New York Times best-selling author: his most recent book is Get What’s Yours – the Secrets of Maxing Out Your Social Security Benefits.
Larry has been on my show many times to discuss the personal financial planning software his company developed, MaximizeMySocialSecurity. This online tool shows how to optimize social security benefits claims.
Now, he has launched a new software program, AnalyzeMyDivorceSettlement, a fast and effective means to help spouses reach a fair divorce settlement, taking into account all relevant factors, including tax and Social Security issues.
“The goal is to help divorcing couples resolve their financial questions and differences objectively and limit settlement disputes that can entail large legal fees,” Larry said.
Nobody likes to talk about divorce, but when it happens – and it happens a lot - how do you split assets and make arrangements that are fair to both parties?
AnalyzeMyDivorceSettlement compares the ongoing discretionary spending that each spouse will be able to afford under any divorce settlement. Discretionary spending is the amount each spouse can sustain after paying taxes, covering housing expenses, paying for alimony and child support, etc.
Larry practices what he preaches. He and his ex-wife used the software to settle their own divorce. As a result, they were able to analyze their two living standards and tweak the settlement until they reached an agreement that both felt was fair.
“A lot of my friends went through divorce wars,” he said. “This software can help you avoid all of those legal bills because it can do calculations quickly.”
Alimony, or spousal support, is the number one sticking point for couples who are separating, Larry said. Some states have no set formula or guidelines for alimony.
“The question of what is enough or appropriate is complicated sometimes,” Larry said. “This software gets rids of all the complication.”
In some cases, one spouse may be more financially savvy than the other. Given that many Americans today don’t know the difference between a stock and a bond, I wondered if the software was easy to use and understand.
“The software is meant to be understandable to everyone,” Larry said. “You can also hire someone to do the analysis and go over the report via conference call. At the end of the day, it will cost a whole lot less than you are likely to pay with lawyers.”
The software ranges in price from $99 for the basic package to $399 for multiple families and $1500 to have the company do the work for you.
Some people will use this software defensively, to ensure that the other spouse isn’t trying to take advantage of them, Larry said. But others are just looking to keep the divorce as simple and amicable as possible.
“The whole point is to take away the emotion and make this an objective analysis,” Larry said. “There is always going to be some pain and anger (in a divorce), but we don’t need to layer on top of that a big war over financial questions that can be resolved.”
Kent Smetters is the Boettner Professor of Business Economics and Public Policy and faculty director of the Penn Wharton Public Policy Initiative at the Wharton School of the University of Pennsylvania.