Do not let the grey divorce damage your retirement
Divorce after 50: Don’t let the “gray divorce” ruin your retirement
Gray divorce – divorce after 50 – can really limit your retirement lifestyle.
If you say “yes,” your personal finances may not be the first thing to think about. But the truth is that couples who get married and stay married have perks that single people simply don’t have, such as the ability to split expenses, favorable tax treatment, and two (or more) sources of income.
Baby boomers have always been known for breaking down stereotypes, and one of them could be the traditional imperatives of marriage.
Divorce rates for people over 50 have doubled since 1990, according to data from the USCensus Bureau. And for those over 65, the news is worse as divorce rates have tripled.
Worse, without the financial benefits of marriage, unmarried baby boomers are almost five times more likely to be poor.
There is a lot to consider when it comes to divorce after 50 and approaching retirement. Here are 16 considerations:
“Individuals going through a gray divorce are severely disadvantaged economically and represent a growing demographic,” said Susan Brown, a sociologist at Bowling Green State University.
Compared to married couples, those who fall victim to “gray divorce” may have a harder time quitting professional life and living comfortably in their golden years.
Couples have made it when it comes to financial gain. With more than one source of income and the ability to share expenses, financial burdens can be borne more easily by couples than single people. There are also tax advantages and social security incentives for married couples.
Single people, on the other hand, have to pay full mortgage, rent, living expenses and insurance.
“Social security was developed at a time when most of the elderly were married, a scenario that is less common today and is likely to be even less typical in the future,” the study says. “In fact, the decline in marriage is associated with a lower entitlement to spouse and widow benefits for women.”
Single people, especially those about to retire, could use up their resources faster. This trend is particularly worrying at a time when adults need their resources most: retirement.
The economic disadvantages are most onerous for divorced or unmarried women. However, those who become widowed later in life are the most favored singles, according to the Bowling State study.
Divorce can be heartbreaking, but you are likely facing one of the happiest times of your life!
Research by Age Wave and Merrill Lynch has shown that of all phases of our lives between 65 and 74 years of age, we are happiest and most satisfied.
And experts from Princeton University and the London School of Economics and Political Sciences found that happiness peaks at age 5. 23 and 69.
Whoa! Sixty-nine! That’s older than many of us. And even if you are over 69 years old, you can still be very lucky – luck doesn’t usually fall off a cliff!
Here are 65 tips for happiness, health, and wealth in retirement.
It is not uncommon for one half of a couple to be financially better informed than the other. If you know less, now is the time to get your full financial picture in hand.
You may want to start by getting a full credit report for you and your spouse and reviewing tax returns. And NOLO has a guide on how to find hidden assets in divorce settlement.
Most couples who divorced after 50 were in long-term marriages. Hence, a 50/50 division of property is likely to be in order and alimony likely to be paid.
And debts are not exempt from the split. In the jointly owned states, you are responsible for half of your spouse’s debts, even if they are not in your name.
Working with a financial planner and preparing for unexpected financial problems can also protect assets and potentially result in fewer losses after a disruption. And there are a few considerations you may not want to go through on your own, including:
QDRO: Retirement plans such as 401 (k) s or tax-free annuities require a “Qualified Domestic Relationship Arrangement” or QDRO to determine how they will be split to protect the couple from significant tax effects. A retirement planner can advise you on the best time to get a QDRO, which is usually sooner rather than later. For example, if one spouse dies before the order is obtained, the other spouse could lose money that he or she planned.
Questions about the house: For some couples, selling and sharing the profits may be the best course of action. However, if a spouse wants to keep the house, it can provide some financial security for retirement. A counselor can help clear up the murky water around this decision.
Settlements: You probably want your financial advisor to review all statements before they are set in stone. A good counselor could improve the details and help you avoid pitfalls that affect the rest of your life.
Unless you have a prenuptial agreement, your divorce is subject to the rules of the state in which you live. In general, the rules aim to ensure that your wealth is distributed fairly. In some states (jointly owned states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), the property acquired during the marriage will be divided equally if the parties do not agree.
Your homes and your 401 (k) can be especially contentious in a divorce as they are usually a couple’s most valuable asset.
According to the 401 (k) Help Center, there are four common ways to deal with a 401 (k) and other retirement accounts in the event of a divorce:
1. Comparison value: In that case, you could keep the 401k and your spouse would take something of comparable value.
2. Split the account into: If you intend to split the money into the 401k, it can be complicated due to distribution rules and other regulations related to 401 (k) s. To split the money in the account, you need a special court order – the Qualified Domestic Relations Order (QDRO).
3. Cancel account: You can withdraw the account, but this is usually not the best option due to the distribution rules.
4. Rollover: If you transfer all or part of the account, you will not be working for the company that started the 401 (k).
Teaching an old dog new tricks can be difficult. Be careful with yourself.
Breaking up is difficult – no matter how old you are. But it could be even more difficult in your 50s and beyond when routines and preferences are firmly entrenched.
During this time, take good care of yourself, meet up with friends, and stay active.
Whether or not you are working with a financial advisor, taking your own inventory of what you have as a newbie and projecting it forward can be very helpful. Even if you are financially behind, knowing what you need can be very helpful.
It is important that as soon as you even consider divorce after 50, as a single person, you create your own retirement plan. Document what you have now and what you plan to spend in the future and see where you stand. Then start tweaking your plans – retire later or move to a more affordable community – to create a secure future for yourself.
The NewRetirement Retirement Planner makes this process easy and you are guaranteed to feel better with a plan.
If you are divorced but your marriage lasted 10 years or more, you can receive benefits from your ex-spouse’s record (even if they remarried) if:
- You are single
- You are 62 years or older
- Your ex-spouse is entitled to social security pension or disability benefits
Assuming you have your ex-spouse’s Social Security number, the Social Security Agency can help you figure out which is getting you the highest paycheck.
Almost all financial decisions have tax implications. For example:
- Should you use a monthly check or a lump sum for alimony? (And know you don’t pay tax on that income.)
- In the case of a maintenance payment, this is no longer tax-deductible.
- Selling your home can have a heavy tax burden.
- The division of investment accounts can mean a sale and have tax consequences.
- If you split up different accounts, do you have a bigger lifelong tax bill with the broker account or annuity plan?
Again, a financial advisor can come in handy in figuring out tax issues for a gray divorce.
In addition to clarifying your current financial situation and retirement savings, you need to ensure that your estate plans and beneficiary designations are updated.
Support for underage children is always part of a divorce settlement. However, you may also want to document who is responsible for supporting adult children.
Discover 5 reasons why your loved ones could be at great risk to your retirement savings.
Many couples plan to rely on each other for long-term care. This is usually not possible after a divorce.
Carefully consider your long-term care options. Think about what care you want and how you will pay for it. Here is a guide to planning long-term care.
Before you get Medicare eligibility at age 65, you may rely on your spouse for medical care.
After the divorce, think carefully about your insurance and expenses options. You may find ideas here: 9 Creative Ways to Fund Healthcare Expenses Before You Are Eligible for Medicare.
Remarriage is more likely to end in divorce, so consider writing a prenuptial agreement for your next marriage.
You can use it to deal with many of these monetary topics. This is important because you are older, have more wealth than you would in a first marriage, and may have grown children on both sides.
Get professional advice from your lawyers, auditors and financial advisors.
And keep your retirement savings up to date!
Being alone sounds scary to many people and liberating to others.
Either way, here are 17 tips for being a solo senior!