Divorce can be painful — emotionally and financially — for anyone. But when the split happens later in life, the less time you have to recover from the economic hit. And, the more is at stake.
A growing number of older adults are facing this problem: the divorce rate among U.S. adults ages 50 and older doubled between 1990 and 2010, according to a study out of Bowling Green State University. About one in four divorces includes someone over 50. Susan Brown, who led the research, says a review of the data through 2014 found the rates have stayed about the same in subsequent years.
Reasons for the rise include longer lifespans, more women in the workforce, changing notion about marriage and higher rates of remarriage, which boost your odds of splitting.
We asked a few experts to weigh in on what to do when divorce suddenly becomes part of your retirement plan. While the challenges of a so-called "gray divorce" are similar to those of a divorce at any age, factors like limited working years ahead, complicated assets, adult children may magnify the difficulties.
Consider these steps:
GET YOUR TEAM TOGETHER
The team of professionals that guides you through the process may include an attorney, mediator, financial planner, accountant and therapist. In a gray divorce, that financial expert is particularly important because of the lifetime of assets built up and because retirement finances are critical but tricky. Valuing those assets and income streams requires expertise. "It's a terribly emotional time and getting objective information is key," said Dede Jones, a financial planner in Colorado. "The mistakes you can make through the process are far more expensive than the help.
DECIDE WHERE TO LIVE
One big sticking point, especially with an older couple, is who gets to keep the family house. Refusing to budge over the home makes emotional sense, given the years of memories and fear of a new life ahead. But staying might not make the best financial sense, said Janice Green, a family law attorney in Texas.
Be open to alternatives that will leave you in a better position. Selling a home or opting for other assets in the settlement may provide the income you will desperately need in the years ahead. And downsizing can dramatically help manage your costs moving forward.
"The more that I can get people to be creative about the future, it helps remove some of the fear," Green said.
FIGURE OUT HOW TO GET BY
The biggest challenge for someone going through a gray divorce is ensuring there's enough money to provide a comfortable retirement said Terri Munro, a financial planner in Georgia.
Research finds that older adults are unlikely to recoup the financial losses associated with divorce, particularly women who were out of the labor force for decades. A nest egg built for one couple must suddenly stretch to sustain two households. Women who stopped working to raise kids find that alimony is less common than it used to be. At least one spouse may already have retired and find it difficult to find work at this stage.
"You have to weigh up and reassess what your options are based on what the settlement is," Munro said.
Options could be delaying retirement, returning to the workforce, downsizing your home, selling a vacation property or making other lifestyle adjustments. Jones said she has seen clients drive for Uber or rent out parts of their home to make things work.
You may have to reconsider commitments to adult children, such as paying for a wedding or grad school. You also may need to make catch-up contributions to retirement accounts and draw down from savings in different ways than planned.
One silver lining: if you have been married ten years or more you are entitled to spousal Social Security benefits, which you can draw without alerting your ex.
DON'T FORGET YOUR HEALTH
Healthcare can be expensive in retirement, so divorce planning must consider how to pay for health insurance post-split.
Once divorced, you won't be able to stay on a spouse's employer plan. Medicare is not available until age 65, and there may be costs for any supplemental insurance.
Munro suggests considering long-term care insurance that would pay benefits if you needed at-home care or a stay in an assisted-living facility. Without a significant other, you do not have that safety net of a spouse as a caregiver. Be warned: finding a reasonably-priced plan gets harder as you age.
UNDERSTAND YOUR ASSETS
The value of $100,000 in a checking account is not the same as $100,000 in an IRA or $100,000 in home equity, said Jones. Estimating the value of those assets over time, as a financial planner can help do, is crucial to plan properly for retirement. For example, a home may increase in value over time but won't provide steady income and will take money to maintain, while the same stake in stocks could throw off dividend income but potentially lose value in a market correction.
"I can guarantee you there will be elements of the financial plan that have unintended consequences," Jones said.
A professional can also discuss the tax implications of those strategies. Older clients who have built significant home equity may face capital gains taxes if they sell, which divorcing younger adults would not, said Sara Stanich, a financial planner in New York.
DO YOUR PAPERWORK
Don't neglect the details. Update all the legal agreements and accounts you've set up during the course of your marriage, from bank accounts to deeds. Pay special attention to wills, estate plans and beneficiary designations for retirement accounts.
If you don't update your will, Jones said, most states will invalidate it when they see a couple has divorced. Not so for beneficiary designations. If you've split and forgotten to change your beneficiary on your 401(k), your ex will get your cash whether you want them to or not.