Will Gray Divorce Ruin Your Retirement Plans?

Over the past quarter-century, as the divorce rate among couples 25 to 39 years old decreased 21%, the rate of divorce among adults 50 and older—often referred to as “gray divorce”—rose 109%, according to Pew Research. Divorce among couples ages 40 to 49 rose 14%1.

There are a lot of theories about what fuels this trend: empty-nest syndrome, changing priorities, growing apart (or boredom), the financial independence of women as compared to previous generations. The availability of healthcare to spouses who have been on her, or his partner’s policy also makes divorce a more viable option today than in the past.

Whatever the reason couples choose to split later in life, she or he need to be aware of some special challenges that may require them to reimagine her or his retirement plans:

  • Be Prepared for Economic Hardship. Compared to married people, those experiencing “gray divorce” may have a tougher time when it comes to leaving the workforce and living comfortably in their golden years. With more than one source of income and the ability to split expenses, financial burdens can be more easily met by couples compared to single people. The economic disadvantages are the most burdensome for women who are either divorced or never married.
  • Embrace Your New Life. Divorce may be heart-wrenching, but you are probably headed for one of the happiest periods of your life. Research from Age Wave and Merrill Lynch found that, of all periods in our life, we are happiest and most content between the ages of 65 and 742.
  • Know What You Have to Split. It is not uncommon for one half of a couple to be more financially informed than the other. If you are the one with less knowledge, now is the time to get your hands around your full financial picture.
  • Expect a 50/50 Split. Most couples divorcing after 50 were in long-term marriages. Therefore, it is likely that a 50/50 split of assets is in order and alimony will likely be paid. Debt is not exempt from being split. In the states with community property laws, you are responsible for half of your spouse’s debt even if it isn’t in your name.
  • Consider Working with a Financial Planner. Working with a financial planner and being prepared for unexpected financial bumps can also protect wealth and potentially lead to less loss after an upset.
  • Understand What Happens to Your Retirement Accounts. In some community property states, assets that were acquired during the marriage will be divided equally if the parties do not come to their own agreement.

Your home and your 401(k) may be particularly contentious in a divorce since they are usually a couple’s most valuable assets.

It is important, as soon as you even start to think about divorce after 50, to create your own retirement plan as a single person. Document what you have now and what you want to be spending in the future and see where you stand.

  • Estate Planning and Beneficiary Designation. It is not just your current and retirement financial situation that need to be sorted out, you will also want to be sure that your estate plans and beneficiary designations are updated.
  • Social Security. If you are divorced, but your marriage lasted 10 years or longer, you can receive benefits on your ex-spouse’s Social Security (even if they have remarried) if: you’re unmarried or age 62 or older.

Breaking up is hard to do — no matter your age. But, it might be even harder in your 50s and beyond when routines and preferences are established.

Take good care of yourself during this time, meet with friends and stay active!

  1. https://www.pewresearch.org/fact-tank/2017/03/09/led-by-baby-boomers-divorce-rates-climb-for-americas-50-population/
  2. https://apnews.com/press-release/pr-businesswire/152da7c0b0604609aa75703582d04811

Connect with an advisor in your area to find out if your retirement is on track.