Decades of building wealth and raising a family make it more challenging to divide assets in a mutually agreed upon and equitable manner.
After steadily rising for decades, overall divorce rates in the United States hit a 50-year low in 2019. While marriage advocates are celebrating the decline in broken unions, their joy may be short-lived.
Divorce rates are expected to spike again in the aftermath of the pandemic. After spending 24/7 together—with little outside social contact coupled with the financial, emotional and physical stress of the pandemic—some couples are taking a hard look at their marriage. For certain empty-nesters, the pandemic was a preview of what retirement with their spouse might look like, and they didn’t like what they saw.
Recently, several of our financial advisers have reported a noticeable uptick in calls inquiring about the financial implications of divorce. Many of those calls are from clients in their 50s and above. These later-in-life dissolutions, like the highly publicized split by Bill and Melinda French Gates, are known as “gray divorces” and they’re on the rise.
Since the 1990s, the divorce rate for adults 50 and older in the U.S. has roughly doubled, according to findings from the Pew Research Center. In fact, for adults 65 and older, the divorce rate has tripled over that same period and is even worse for remarriages.
Demographics, social changes and the pandemic have all contributed to the trend. People are living longer, women are more financially empowered, and the stigma of divorce has lessened. A healthy 65-year-old can expect to live another 20-plus years, and women typically live five additional years. Many look ahead and decide this is a long time to spend in an unhappy marriage.
However, a later-life divorce is complicated and requires careful financial planning. As with the Gates divorce, decades of building wealth and raising a family make it more challenging to divide assets in a mutually agreed upon and equitable manner. For most divorcing couples, hiring an experienced attorney to represent and protect each individual’s interest is wise, especially since divorce laws and insurance laws vary from state to state.
When thinking about the financial considerations, there are three areas to focus on:
Absent a prenup, there are several big questions that will surface right away. If a couple can agree on these areas, it’ll help expedite the matter and save on attorney fees.
Divorce is an emotional, highly charged life transition that often leads to rash and unwise decisions. Here are some definite do’s and don’ts when it comes to your finances:
In a gray divorce, there are often additional financial considerations that may be overlooked. Being aware of these considerations will help you think comprehensively about your settlement.
If you qualify for your own Social Security, but the amount is lower, you’ll get an additional amount up to the 50 percent spousal benefit. If your ex-spouse is deceased, you’re eligible for the same survivor benefits as current spouses, which means you could receive the full amount of your ex’s benefits. Note that your former spouse doesn’t have to be collecting his or her retirement benefits yet for you to claim ex-spousal benefits. However, if this is the case, the divorce must be at least two years old.
According to a report from the U.S. Government Accountability Office, women’s household income fell by 41 percent following a divorce or separation after age 50, while men only had a 23 percent drop. With women living longer than men, that dip in income can have serious consequences.
Divorce is such an emotionally and financially challenging time with a lot of important decisions to be made. Ease the burden with trusted legal and financial advice to help you take a comprehensive approach to this significant life transition and feel more secure about your future.
This article was originally published in MarketWatch
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