Nov. 29, 2017
By now you’ve heard the statics on late life divorce, or what some are calling grey divorce. The last statistic I came across suggested that the national rate of divorce in the United States is trending down, except for one group: those 50+, who have seen their rate of divorce surge 50% in the past 20 years, with one in four couples divorcing after age 50.
As a result, you may be surprised to learn how many times financial professionals are asked about divorce. I would even go as far as saying some people actually come to us before going to a therapist, pastor, or other source.
Are you and your spouse on the same page for retirement? (Photo Credit: Shutterstock)
Sometimes, you can see it coming. A client will call and ask to come in. I’ll reply no problem and ask if there are any reports or other things they want me to have ready, and when they say, “No, just want to ask and few questions and go over some stuff,” it’s a solid clue as to what’s coming, particularly for those who have retired in the last couple years.
Reality is, the personal and financial impact of divorce can be severe once people stop working. There are no simple equations or clear-cut ways to anticipate its results and ripple effects. Deciding how to divvy up real estate, retirement savings, pensions, a family business, or stock options, while remaining mindful of life insurance proceeds, long-term care insurance policies, and debts, can be both costly and emotionally devastating.
Add in expenses such as attorney and filing fees, mediation charges, and a host of other costs than can arise, and it’s easy to see how a divorce during retirement can dramatically handicap each party’s ability to maintain a suitable standard of living.
Unlike financial assets, personal assets – which include each party’s family and friends – won’t be split or shared evenly by a judgment or court order. Sides are inevitably taken, with both parties often portrayed in a negative light, leaving one or both divorcees with fewer friends and struggling for both financial and emotional support. It’s not uncommon for newly divorced persons to find themselves either ostracized by married couples or uncomfortable in such situations because they are now single.
Financial hardship stemming from a divorce can force a retiree to increase withdrawals from their retirement plan and perhaps incur more debt in order to both maintain a household and cover attendant costs, such as appliances, utilities, property taxes, support for adult children or parents, etc.
A contested divorce can be not only grueling and emotionally draining, it may take years to finalize. This can cause some retirees to throw in the towel without putting up much of a fight. As a result, their overall share of the assets and future income can be reduced, which can come back to bite them when inflation, long-term care needs, and rising health care costs impact them later on.
There are a myriad reasons why new and existing retirees consider divorce. In cases involving emotional or physical abuse, the trade-offs may be necessary. In situations where couples have put their relationship on the back burner for the sake of their careers or kids, or are dealing with infidelity, or just find themselves in different seasons of life, it may be worthwhile to seek resolution, forgiveness, and then rebuild together.
What’s been your experience with divorce in retirement? Please use the comments section to share your stories and input.