Divorce After 50: Don’t Let ‘Gray Divorce’ Ruin Your Retirement

divorce after 50

When you say ‘I do,’ your personal finances may not be the first thing on your mind. But the truth is, couples who get married and stay married have benefits that single people simply don’t, such as being able to split up expenses and having two (or more) sources of income.

However, not everyone stays married forever and divorce by older Americans is increasing. The number of people over the age of 50 who divorce nearly doubled between 1990 and 2010, according to a recent study. Researchers have dubbed this divorce age range for those over the age of 55 as the ‘gray divorce,’ and have started to note its many financial consequences.

“Individuals who go through gray divorce are considerably economically disadvantaged, and they are a growing demographic group,” says Susan Brown a sociologist at Bowling Green State University.

Compared to married folks, those who fall prey to the ‘gray divorce’ may have a tougher time when it comes to leaving the workforce and living comfortably in their golden years.

Considering Divorce After 50? Why Being Married May Be Better (For Your Finances)

Couples have it made when it comes to financial advantages. With more than one source of income and the ability to split expenses, financial burdens can be more easily met by couples compared to single people. Additionally, there are tax advantages, as well as Social Security incentives for married couples.

Single people, on the other hand, have to carry the full burden of mortgages, rents, living expenses and insurance by themselves.

“Social Security was designed during an era when most elders were married, a scenario that is less common today and is likely to be even less typical in the future,” the study reads. “In fact, the decline in marriage is linked to reduced spouse and widow benefit eligibility for Social Security among women.”

Single people, especially those who are closer to retirement, could see their resources depleted more quickly. This trend is particularly concerning around the time when adults need their resources most: during retirement. Going through a divorce later in life can leave a person more financially vulnerable and at an economic disadvantage, according to research from Bowling Green State University.

401k and Divorce — What Happens?

Assuming you do not have a prenuptial agreement, your divorce is subject to the rules of the state where you live.  In general, the rules aspire to a fair distribution of your assets. In some states (community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), assets that were acquired during the marriage will be divided equally if the parties do not come to their own agreement.

Your homes and your 401k may be particularly contentious in a divorce since they are usually a couple’s most valuable assets.

According to the 401k Help Center, there are four common ways of dealing with a 401k divorce:

Comparable value: In this case, you might keep the 401k and your spouse would take something of comparable value.

Split the account: If you  intend to split the money in the 401k, it can be complicated due to distribution rules and other regulations related to 401ks.  To split the money in the account, you need a special court order — the Qualified Domestic Relations Order (QDRO).

Liquidate the account: You can cash out the account, but this is not usually the best options due to distribution rules.

Rollover: Rolling over all or part of the account is you are not working at the company that started the 401k and if you are over the age of 59 1/2.

Divorce After 50: Baby Boomers Continue to Set Trends

Baby Boomers have always been known for breaking down stereotypes, and one of those may be the traditional constraints of marriage.

About one in three Baby Boomers is unmarried, the study found. Compared to a few decades ago, this is an astounding trend. Without the financial advantages of being married, unmarried Baby Boomers are nearly five times more likely to be living in poverty.

Gray Divorce: Hard to Teach an Old Dog New Tricks

Breaking up is hard to do — no matter your age.  And it might be even harder in your 50s and beyond.

The economic disadvantages are the most burdensome for women who are either divorced or never married. However, those who are widowed later in life are the most advantaged singles, according to the Bowling State study. Even getting remarried later in life doesn’t cut it, as though who have been continuously married tend to be better off financially, the study found. The shock of divorce is also likely to be a hit to finances that can be harder to recover from compared to married people.

“Unlike those who have experienced marital dissolution, the continuously married have had a lifetime together to accumulate resources,” the study found. “In contrast, those in remarriages have had to surmount the financial shock that often accompanies marital dissolution.”

Divorce After 50: Tips

While there’s no surefire way to keep a married couple together forever, there are some steps everyone can take to ensure they are financially secure, even after a divorce.

1. For one, divorce prior to the age of 50 could be less detrimental to economic well-being, the study found. People who divorce earlier may have more time to make up for financial losses.

2. Researchers also noted that people should not be dependent on spousal social security during retirement, as these benefits may not be available following a gray divorce.

3. Working with a financial planner and being prepared for unexpected financial bumps can also protect wealth and potentially lead to less loss after an upset.

4. Create your own retirement plan.  Taking stock of what you have as a single person and projecting forward can be very empowering.  Even if you are behind financially, it can help a lot to know what you need.  Some online planners are easy to use, but sophisticated enough to be useful.

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