“Gray divorce” – divorces involving adults over 50 – are much more common than they were in past generations. However, couples who divorce after many years together face unique financial concerns that can impact their retirement plans and financial stability. What challenges might older people face when ending their marriage?
Older people often have more retirement savings.
Retirement accounts are often significant assets, especially after a long career. A person’s comfort in their later years may depend on receiving their fair share of 401(k)s, IRAs and pension plans. This can make the fate of retirement savings and benefits a contentious issue.
Couples should carefully consider how they will divide their savings. Often, dividing these accounts requires a Qualified Domestic Relations Order (QDRO) to avoid incurring early withdrawal penalties or unintended tax consequences.
Health insurance is vital for older people.
For many aging adults, health insurance is a critical concern. If one spouse has been dependent on the other’s health insurance plan, divorce can leave that spouse without coverage. This can be particularly problematic for those with existing health conditions or limited access to alternative coverage. It is vital for these people to explore other sources of insurance and options like COBRA, which can extend coverage for a certain period post-divorce.
Older people have often invested in their home.
For many older people, their home holds sentimental value and represents a significant portion of the couple’s assets. This can make it difficult to determine what will happen to their house in divorce.
During the divorce process, a couple’s options may include one spouse buying out the other’s interest, selling the home and dividing the proceeds, or even continuing to co-own the home for a period. Each choice has financial implications, including potential changes in property taxes, maintenance costs and mortgage obligations.
One spouse may need financial support.
In many cases, one couple may have earned significantly less than their spouse. In other cases, one spouse may have been out of the workforce for an extended period to raise a couple’s children or care for their home. This can make it difficult for them to become financially independent, especially when women’s household income can drop as much as 40 percent in the year after their marriage ends. In these situations, one person may need spousal support or alimony to support themselves after divorce.
Divorcing later in life brings with it a unique set of financial challenges. The intertwining of lives over many years means disentangling them requires careful planning and consideration. However, by addressing these key financial issues, you can ensure a more secure financial future post-divorce.