Gray divorce — divorce after age 50 — can undermine your retirement lifestyle.
When you say “I do,” your personal finances may not be the first thing on your mind. But the truth is, couples who marry and stay married enjoy benefits that single people simply don’t, such as the ability to split expenses, favorable tax treatment, and having two (or more) sources of income.
Divorce rates for older Americans have doubled and tripled
Baby Boomers have long been known for shattering stereotypes, and one such traditional constraint may be marriage.
According to data from the US Census Bureau, divorce rates for people over 50 have doubled since 1990. The news is even worse for those over 65 as divorce rates have tripled. In 2021, 34.9% of Americans who were divorced in the previous calendar year were 55 or older – twice average for any other age group.
Even worse, without the financial benefits of marriage, unmarried baby boomers are nearly five times more likely to live in poverty.
16 Tips and Considerations for a Gray Divorce
There is a lot to think about when it comes to getting divorced after the age of 50 as retirement approaches. Here are 16 considerations:
1. Be prepared for some economic hardship
“Individuals who experience gray divorce are largely economically disadvantaged, and they are a growing demographic,” says Susan Brown, a sociologist at Bowling Green State University.
Compared to those who are married, those who fall prey to a “gray divorce” may have a more difficult time when it comes to leaving the workforce and living comfortably into their golden years.
Husbands make it when it comes to financial benefits. With more than one source of income and the ability to split expenses, couples can face financial burdens more easily than single people. In addition, there are tax benefits, as well as Social Security incentives for married couples.
Singles, on the other hand, have to shoulder the entire brunt of mortgages, rents, living expenses, and insurance themselves.
“Social Security was designed during an era when most seniors married, a scenario that is less common today and likely to be less common in the future,” the study states. “In fact, a decrease in marriage is associated with a decrease in the eligibility of spouses and widows for social security among women.”
Single people, especially those closer to retirement, could see their resources deplete more quickly. This trend is particularly worrisome around when adults need their resources most: during retirement.
The hardest for women:
Economic disadvantages are the most burdensome for a divorced or never married woman. However, those who are widowed later in life are the luckiest singles, according to a Bowling State study.
2. Embrace your new life
Divorce can be heart wrenching, but you’re probably heading into one of the happiest periods of your life!
Research from Age Wave and Merrill Lynch found that of all the periods in our lives, we’re happiest and happiest between the ages of 65 and 74.
Experts from Princeton University and the London School of Economics and Political Science found that happiness peaks at ages 23 And 69.
Stop! sixty nine! This is bigger than many of us. And even if you’re over 69, there’s still plenty of happiness to be had – happiness doesn’t come off a cliff in general!
Here are 65 tips for happiness, health, and wealth in retirement.
3. Know what you’ll be divided into
It is not uncommon for one half of a couple to be more financially informed than the other. If you’re the one with the least knowledge, it’s time to go over your complete financial picture.
You may want to start by obtaining a complete credit report for both you and your spouse and looking at your tax returns. And NOLO has a guide for how to find hidden assets in Divorce Discovery.
4. Predict the 50/50 split
Most couples who divorce after the age of 50 have been in long-term marriages. Therefore, assets will likely be split 50/50 and alimony will likely be paid.
And religion is not exempt from the division. In states with community property laws, you are responsible for half of your spouse’s debts even if they are not in your name.
5. Consider working with a financial planner during a divorce
Working with a financial planner and being prepared for unexpected financial bumps can protect wealth and possibly lead to less loss after a disruption. And there are some considerations you may not want to navigate on your own, including:
QDRO: Retirement plans, such as 401(k)s or tax-exempt annuities, require a “qualified domestic relations order” or QDRO to determine how they will be divided, to protect spouses from major tax implications. A retirement planner can advise on the best time to get a QDRO, which is usually sooner rather than later. For example, if one spouse dies before the warrant can be obtained, the other spouse may lose the money they were planning to receive.
Questions about the house: For some pairs, selling and splitting the profit may be the best course of action. But if one spouse wants to keep the home, that may provide some financial security for retirement. A counselor can help clear the muddy waters around this decision.
Settlements: You’ll probably want your financial advisor to review any compromises before you put them in stone. A good counselor can refine the details and help you avoid pitfalls that affect the rest of your life.
6. Understand what happens with your retirement accounts in the event of a divorce
Assuming you do not have a prenuptial agreement, your divorce is subject to the rules of the state where you live. In general, the rules aspire to an equitable distribution of your assets. In some states (community ownership states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin)the assets acquired during the marriage will be divided equally if the parties do not reach their own agreement.
Your homes and your 401(k) can be especially controversial in a divorce since they are usually a couple’s most valuable assets.
According to the 401(k) Help Center, there are four common ways to handle your 401(k) and other retirement accounts in the event of a divorce:
1. Comparative Value: In this case, you might keep your 401k and your spouse would take something of similar value.
2. Division of account: If you intend to split the money in your 401k, it can be complicated by distribution rules and other regulations regarding 401(k)s. To divide the money in the account, you need a special court order – the Qualified Domestic Relations Order (QDRO).
3. Reckoning: You can cash out the account, but that’s usually not the best option due to distribution rules.
4. Extension: Reinstating all or part of the account means you don’t work for the company that started your 401(k).
7. Be calm with yourself
It can be difficult to teach an old dog new tricks, so take it easy on yourself in the process.
Breaking up is hard to do – no matter your age. But, it can be more challenging in your 50s and beyond when routines and preferences are so ingrained.
Take good care of yourself during this time period, get together with friends and stay active.
8. Start your retirement planning as early as possible
Whether you work with a financial advisor or not, taking your own inventory of what you have as a newly single person and planning ahead can be very powerful. Even if you are behind financially, it can help a lot to know what you need.
It is important, once you begin to consider divorce after the age of 50, that you work out your retirement plan as a single person. Document what you have now and what you want to spend in the future and see where you are. Then, start adjusting your plans—retire later or move to a less expensive community—to create a secure future for yourself.
NewRetirement Planner makes this process easy and ensures that you feel better with the plan.
9. Think about your Social Security strategy
If you are divorced, but your marriage lasted 10 years or more, you can get benefits on your ex-spouse’s record (even if they remarried) if:
- you are not married
- You are 62 or older
- Your ex-spouse is entitled to a Social Security pension or disability benefit
Assuming you have your ex-spouse’s Social Security number, the Social Security Administration can help you figure out which benefits will give you the biggest paycheck.
10. Consider the tax implications
Almost all financial decisions have tax implications. For example:
- In the event of receiving alimony, do you have to take a monthly check or a lump sum? (And know that you will not pay taxes on this income.)
- In the event that alimony is paid, it is no longer tax deductible.
- Selling your home could result in a large tax bill.
- Splitting investment accounts can mean selling, which leads to tax consequences.
- If you distribute different accounts, will you have a larger lifetime tax bill with the brokerage account or retirement plan?
Again, a financial advisor can be helpful in knowing the tax issues of a gray divorce.
11. Ensure that real estate plans and beneficiaries’ names are updated
It’s not just your current financial situation and retirement that needs to be sorted out, you’ll also need to make sure your estate plans and beneficiary appointments are up to date.
12. Remember to consider the support of adult children
Support for minor children is always part of a divorce settlement. However, you may also want to document who will be responsible for helping support adult children.
Find out 5 reasons why your loved ones are a big risk to your retirement insurance.
13. Rethink long-term care plans
Many couples plan to rely on each other for long-term care. Obviously, this usually won’t work after a divorce.
Consider your long-term care options carefully. Think about what you want for the care and how you will pay for it. Here is a guide to planning for long-term care.
14. Be prepared for health insurance changes
Before you become eligible for Medicare at age 65, you may depend on your spouse for Medicare coverage.
After your divorce, think carefully about your options for insurance and personal expenses. You may find ideas here: 9 Creative Ways to Finance Your Health Care Costs Before Medicare is Due.
15. Planning to get married again? Consider prenup!
Remarriage is more likely to end in divorce, so consider writing a prenuptial agreement for your next marriage.
In it, you can deal with a lot of these monetary issues. This is important because you are older, have more assets to consider than the first marriage, and there may be adult children on both sides to consider.
Seek professional advice from attorneys, accountants, and financial advisors.
And keep your retirement plans updated!
16. More tips for retiring alone
Loneliness is scary for many people, and scary for others.
Either way, here are 17 tips for getting older on your own!