Divorcing later in life is becoming more normal for people who are 50 years or older. In fact, since the 1990s, this “silver divorce” rate has more than doubled. In 2015, for every 1,000 married people 50 and over, 10 divorced — an increase from 5 people in 1990. And when you account for people 65 years and older, that amount has tripled in the same timeframe.[i] As a result, the need for proper financial strategies during this evolving stage is becoming more important than ever.
As you navigate your finances during a silver divorce, here are three key items to address.
1. Identify your individual incomes — and gaps
Divorce can directly affect household income, as each person can no longer rely on their spouse’s income to support them. In fact, when divorces or separations happen to people 50 and over, men’s income drops by 23% while women’s income can drop by 41%.[ii] The result often forces many women between the age of 50 and 74 to continue working full time, rather than retiring.[iii] As such, making sure you can financially support yourself without your spouse is an essential priority.
2. Manage your retirement accounts
Your divorce may find you dividing up your 401(k) or IRA accounts — which could include substantial assets, given the breadth of earning years behind you. Why? A court can require a spouse to pay out their retirement accounts during a divorce under the qualified domestic relations order. As a result, you could end up with substantially less money than you expected you would have in retirement.[iv] Further, since you possibly listed your spouse as the beneficiary, you will want to revisit your listed beneficiary information for any of your retirement accounts (and insurance policies).[v]
3. Consider downsizing your home
Owning a home is one of the largest assets for retirees. It’s also a regular hefty expense, as an increasing amount of seniors are retiring with mortgage debt.[vi] And this large debt can directly affect your income and cash flow.[vii] As such, retired divorcees should address their cost of living and determine whether they can still afford their home mortgage. After a divorce, you may not need the same size home to support your new lifestyle. So finding a smaller mortgage or even choosing to rent could help you. By downsizing, you can also decrease your monthly expenses.[viii]
Overall, your unique financial needs and retirement goals will further define the financial strategies you should address when divorcing later in life. If you have any questions about the options available to you — or how a divorce could impact you financially — we’re happy to talk. Please call us at (518) 581-1642.