You’re sitting at the dinner table and there’s silence. Not only are your kids off to college but you and your spouse have nothing to talk about. After 25 years of marriage, you realize that without the kids, you really have nothing in common anymore. More and more, you’ve been thinking you don’t want to spend the rest of your life in an unfulfilling relationship. Divorce has been crossing your mind more frequently.
You are not alone. Many couples in long-term marriages feel the same way. In fact, a new term, “gray divorce,” has been coined to define this demographic. Gray divorce describes couples over the age of 50 who have been married for at least 20 years and choose to divorce their spouse.
While the divorce rate across the country has held steady near 50 percent, the rate of gray divorce has more than doubled in the past 20 years, according to Bowling Green State University research.
Surprisingly, it’s not discord or even cheating that’s driving the choice to divorce. It’s the fact that spouses are simply growing apart. And more often than not, it’s women, not men, making the decision to part ways. According to an AARP study, women are the drivers behind 66% of gray divorces.
The uptick in gray divorce has been attributed to the increase in three factors:
· women’s financial independence;
· life expectancy; and
· social acceptability of divorce.
As women become more financially autonomous and know they're going to live decades longer, they realize they now have the means, motivation and mindset to go out on their own.
Gray Divorce Comes with a Silver Lining
Divorce is always challenging, especially gray divorce, since the decisions are more complex and the stakes higher. Divorcing couples must keep in mind that there are fewer years to recover from financial mistakes and economic setbacks from the divorce. Also, there’s less time to save for retirement.
But there’s a silver lining – financial independence – as long as you prepare. Here are five essential financial tips to consider when untying the knot later in life.
1. Understand Social Security benefits. Social Security is complex, so make sure you are aware of all the nuances to gain the most benefit. In a nutshell, since you’ve been married for more than 10 years, and if you’re 62 and single, you can collect up to half of your ex-spouse’s Social Security benefit. Your benefit will not impact the amount of his or her benefit.
2. Don’t depend on alimony. If you receive alimony, make sure you don’t rely on it exclusively. Keep in mind that alimony can be changed well after the divorce has been finalized. It also can be jeopardized if something happens to your ex-spouse. Make sure to consider life and disability insurance that protect alimony and child support payments if your ex-spouse is unable pay. And be open to considering career opportunities to help you gain additional financial independence.
3. Protect yourself with reasonable insurance. As you age, insurance becomes even more important. If you need a caregiver, for example, your ex-spouse will no longer be there to take on that role. In addition to health, life and long-term care insurance, make sure to think about auto insurance and homeowner’s or renter’s insurance.
4. Secure enough retirement savings. Women tend to live longer than men and therefore often have higher retirement costs. A big, and emotional, question is whether keeping your house is worth potentially risking your retirement savings. If your spouse keeps his pension plan and other assets and you retain the house, will you have enough money to support yourself down the road? You must determine whether you have the time to save what you need to and if you’re willing to sell your house later to help fund your lifestyle.
5. Choose new retirement account beneficiaries. Make sure to update your beneficiaries on all retirement accounts and insurance policies. Additionally, update your power of attorney, health care proxies and living wills. If you don’t, your ex-spouse could end up with those funds or decision-making powers. While decisions and finances are often complicated surrounding a gray divorce, with the right support, including guidance from a financial planner, you can be on the right track to financial independence.
Sam Hubbard, MBA, CFA, CDFA is the principal of Coastal Divorce Advisors, LLC, (CDA), a firm specializing in helping clients understand their financial situation and options throughout the divorce process. CDA is an affiliate of Coastal Capital Management, LLC. For additional information, e-mail Sam@CoastalDivorceAdvisors.com, call 912-234-3657 or visit www.CoastalDivorceAdvisors.com. This article is for informational purposes only and does not constitute legal advice. The opinions expressed are solely those of the author, who is not an attorney. If you require legal advice, please seek appropriate legal representation.
This article was published in the Savannah Morning News. To see this article click here.