Coping with divorce after 50
Tips for managing your finances in a “gray divorce.”
Article published: February 13, 2024
The good news is that divorce rates in the United States are declining; the bad news is that they are on the rise for the 50-plus population. Twenty years ago, just 1 in 10 divorces were couples older than the age of 50. In 2021, nearly 35% of divorces were being filed by people 55 and older, according to the U.S. Census Bureau.
The phrase “gray divorce” describes this trend and highlights the special issues facing older couples going their separate ways.
Why the increase in gray divorce?
It may partly be a societal shift: There is less stigma these days to ending a marriage and living life as a single than there perhaps was when many 55+ people were growing up. It could also be partly longevity: People are living longer, and they have more opportunities to grow as people, develop new interests and hobbies, and live out the dreams they’ve been working toward their whole lives. This scope for new opportunity could cause some to grow apart, particularly when the children have grown and left the home. When you are facing decades of retirement together, and there is already a split in the relationship, the impetus to separate can be compelling.
Finally, one of the biggest contributors to gray divorce is the same as with other divorces – financial differences. The Everyday Wealth in America report produced by Edelman Financial Engines found that 1 in 5 respondents felt that money issues were a threat to their relationship, and that keeping spending a secret was an issue that affected 45% of respondents in their 50s (you can read the rest of the report here).
Couples ending their relationships over money issues need to prepare for the new financial concerns divorce can bring.
Each divorce is complicated in its own way; it is often emotionally distressing and expensive. But even for couples who split amicably and with minimal acrimony, the financial implications can be profound for older couples who have been saving and sharing assets for decades.
The nest egg that they have been building for years now needs to support two households. Retirement income is cut in half, pensions are divided and IRAs may need to be split. But expenses are not cut in half – and the cost of living as a single can be significantly higher than for a married couple living together.
For couples who are divorcing in their 50s, there may still be opportunity for the nonworking (or lower wage earning) spouse to rebuild their career. This is not the case, however, for couples who are closer to or already in retirement. So postdivorce income becomes a more urgent issue.
Another issue is that, especially for older couples, one spouse typically manages the finances, leaving the other spouse unprepared to deal with them. Because that role often fell historically to the husband, according to wealth planner Mary Ann Ferreira, “Financial matters can be magnified for women. A divorced woman can find herself living longer with a lot less to live on.”
Seven considerations during gray divorce
Even in cases where child support and paying for college may not be an issue in a gray divorce, there are many other factors that will need careful consideration in planning for retirement after divorce.
1. The family home
Should either party keep the family home? Does it make more financial sense to sell it? With only one person taking care of the property taxes, upkeep and emergency repairs, the family home could suddenly seem much more expensive. That’s why it may make more sense to sell the home and purchase something less expensive.
2. Debts
It’s essential that both spouses are aware of what is owed jointly, because each is responsible for half of the marital debt (unless otherwise noted in the divorce decree). Start by ordering your credit reports to get the full picture.
3. Lifestyle changes
Both spouses need to be prepared for the possibility of a more modest lifestyle or a move to a place with a lower cost of living. Not only is the divorce process expensive but, as we’ve noted, the hidden costs of living single can take a toll.
4. Caregiving
Who will care for you when you are older? You may be healthy and active at the time of the divorce but could require care and support in the future. You’ll need to set funds aside for caregiving expenses.
Finally, it’s worth noting that any newly divorced spouse – but especially someone age 55 or older – needs to work with a financial planner to create a revised retirement plan. Your planner can help you work out the best integrated wealth plan for your changing circumstances.
5. Tax consequences
It’s always important to consider taxes when you are dividing assets. A $100,000 IRA (pretax money) is not the same as a $100,000 savings or investment account.
6. Social security
If you are the lower-earning spouse (if the marriage is 10 years or longer), you can opt to receive half of your higher-earning spouse’s Social Security at Full Retirement Age (if you have not remarried). You will need to determine whether this is more than the lower-earning spouse is entitled to on their own. Note that this does not change the Social Security benefit amount that the higher-earning spouse receives.
7. health insurance
If one spouse is covering the other’s health insurance through their employer, this could create an issue if you are still years away from Medicare coverage. Affordable health care coverage is a necessity, but funding it can present a real challenge.
Financially preparing for gray divorce
For those nearing their retirement years, divorce comes with its own set of considerations about financial well-being. Here is what you should be asking yourself – and discussing with your planner:
- Set out your goals for the future, both personally and financially. For couples who have been married for decades, it can be challenging to envision what single life might look like. Now’s the time to focus on yourself and what you want to achieve.
- Determine what your income and expenses will be postdivorce. As we’ve said, divorce is expensive, so even if you’ve never kept a budget before, it’s a good idea to get a handle on what your recurring expenses are and how you will cover them.
- Get organized. Gather bank statements, brokerage statements, tax returns, mortgage documents and retirement account information to share with your planner, tax attorney or divorce lawyer. Create a to-do list or keep a notebook handy to help organize your thoughts, smooth the process and take some of the stress out of the situation.
- Take time for yourself. It’s important that you do what it takes to stay healthy, both mentally and physically. Getting divorced is a stressful process and self-care is key.
- Remember your planner is there to help you see the big financial picture and can help you set out an integrated wealth strategy that includes not just investment accounts and IRAs, but education and guidance on insurance, estate planning, tax-smart strategies and mortgages.
Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from your qualified tax and/or legal professionals to help determine the best options for your particular circumstances.
