While the overall rate of divorce in the U.S. has actually been dropping following the surge that began in the 1970s, the number of divorces among those over 50, called Gray Divorce, is climbing dramatically. In one sense, it’s not unexpected. Many of today’s 55+ couples are the Boomers who themselves were the children of divorced parents. They know the upside and downside from both ends of the telescope; so it may have made sense to soldier on in an unhappy marriage while the kids were still at home.
But people are living longer, and many imagine a better life in their later years, free from their current marriages. A better post-divorce life when you’re over 60 can come at a very steep price, though, both emotionally and financially. As you move closer to retirement years, or are already there, splitting up can derail the financial stability you worked hard to achieve.
If you’re a woman over 50, research shows your standard of living drops by 45% following divorce. For men, it’s around 21%. The implications for a secure and properly funded retirement life are significant. To get yourself prepared, here are some considerations:
See the big financial picture… and understand it.
The lives of couples over 60 have a lot of moving parts — homes or multiple homes with considerable equity or debt; IRAs and 401(k)s that may require distributions; financial and other investments; and even businesses. If one spouse or the other has been handling the finances, as well as owning the related professional relationships, there is likely a great deal of detail and unilateral decision-making.
Unraveling joint assets and dividing pensions in an equitable and tax-efficient manner may require getting up to speed quickly.
Know the true cost of freedom.
Community property comes with shared obligations, so you need to know all the details of all the debt. Those will include personal and business liabilities for state, local, and Federal taxes. There may also be personal loans against either or both spouse’s personal property, obligations to family members or business partners, and the financing of toys, the club, and the like.
Property has a price, so be sure you want to hold onto it.
While keeping your home may feel like an existential necessity, the liabilities stack up pretty quickly from taxes, mortgage payments, repairs, common charges, and other costs. Understand the cash flow required when you assume full ownership and analyze whether holding or selling is best.
Healthcare is not a given.
If you and/or your children are on your spouse’s health insurance policy, make sure you know exactly how long you can stay on the policy (this may be part of the divorce negotiations), what happens when you’re no longer on the policy, and the cost of new coverage. If approaching 65, be sure to monitor the requirements for enrolling in Medicare and supplemental coverage.
Build budgets and revenue streams.
Both of you need to understand how life as singles affects cash flow in regard to the full array of obligations you will each now assume and the lifestyles you want to maintain. Spending and savings habits are well ingrained by now. Consider if you’ll be able to make the required adjustments.
Explore options and ideas with a non-judgmental sounding board.
In Gray Divorce, recovery is not just about resilience, it’s also a function of time. There’s far less of it than earlier in life to maximize earnings, grow assets, and tolerate market swoons. Impetuous decisions can have meaningful financial consequences.
At Eddy & Schein Group, we advise clients who are considering Gray Divorce to be sure that counseling and other reconciliatory options have been exhausted. And, if so, to seek smart professional legal and financial counsel for both parties.
As Personal Finance Managers, we can support you as you assume the more demanding level of complexity and accountability in your new life. Visit our LifeArc page to learn about how our services can help you keep your personal finances in order during life transitions.