The divorce rate for the 50+ crowd is on the rise. According to research, 1 in 4 marriages involving couples 50 and older end in divorce. Compare this to 1990 statistics of 1 in 10 people over 50 divorcing and you can see that ‘gray divorce’ is increasing. The reasons for the surge in divorce among this age bracket vary. Increasing longevity along with children growing up and moving on can have an impact on relationships. Also, with more women working, the ability to live apart from a spouse is now feasible. Whatever the reasons, gray divorce can be economically devastating, particularly for women. In the event of a divorce, household income drops by 25% for men and 40% for women - more if she has been absent from the workforce. The cost of living for couples is lower than those flying solo - the cost of living for singles is as much as 50% higher than for couples. Those divorcing later in life have less time to recover financially so planning for a not-so-distant retirement is important.
Although, the challenges of gray divorce can seem daunting, careful planning can make a difference. You want to protect your financial future, so start by collecting financial information so that when it comes to property division, you will get your fair share. Make a clear copy of all tax returns, loan applications, wills, trusts, financial statements, banking information, brokerage statements, loan documents, credit card statements, deeds to real property, car registrations, insurance inventories, and insurance policies. Copy records that can trace and verify your separate property, such as an inheritance or family gifts. If you helped put your spouse through school, include that expense also as there may be a reimbursement for the cost of tuition. Clearly list all your and your spouse’s marital & non-marital assets and your debts, supporting it with documentation.
Think about the property you have to work with and what your expenses will be. When it comes to the house, you may want to weigh upkeep, taxes and payments against sentimental value. Keeping the home does not always make financial sense so consider downsizing and socking the additional money in a well diversified retirement savings account to bolster your savings for retirement. If your divorce settlement allocates assets under a qualified domestic relations order (QDRO), give some thought to your immediate financial needs before rolling it over into your own IRA. You can make a one-time withdraw for your ex’s 401k and the like without paying the 10% early withdrawal penalty, even if you are under the age of 59 1/2. If you roll it over first, then decide to withdraw funds, the penalty stands. Taking time to think about your future budget will help you make better decisions now.
Health insurance can be pricey. After the divorce is final, you will no longer be covered under your spouse’s company health insurance if applicable. You will have the option to extend this coverage through COBRA for 18 months following your divorce, but your costs will increase without the employer contribution. In lieu of COBRA, there may alternatives such as Medicare if qualified, Healthcare Marketplace offerings of late, your own employer’s plan or private insurers. If the expense is out of the question, consider obtaining a legal separation, where you can keep your spouse’s health insurance, but divide the other assets.
Gray divorce for those 62 and older may open up another source of income - Social Security benefits. If you have been married at least 10 years, have not remarried and do not have higher earnings than your spouse, you are likely entitled to half of your spouses social security benefit.
Taking a look at your existing assets, potential income and anticipated expenses combined with thoughtful ‘belt-tightening’ can help you navigate the financial hurdles presented by gray divorce. If you have questions regarding divorce, property division or spousal maintenance, contact the Law Offices of Andrew C. Ladd, LLC.
Source: Fidelity.com, “The Financial Do’s & Don’ts of a Divorce”, accessed January 13, 2015.
