Divorce can be painful — emotionally and financially — for anyone. But when the split happens later in life, you have less time to recover from the economic hit. And more is at stake.
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, and 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.
- Decide where to live. One big sticking point is who gets to keep the family house. Refusing to budge over the home makes emotional sense, but staying might not make the best financial sense.
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.
- Figure out how to get by. 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.
Options could be delaying retirement, returning to the workforce, downsizing your home, selling a vacation property or making other lifestyle adjustments.
You may have to reconsider commitments to adult children, such as paying for a wedding or graduate school.
One silver lining: If you were married 10 years or more, you are entitled to spousal Social Security benefits, which you can draw without alerting your ex.
- Do your paperwork. Update all the legal agreements and accounts you set up during 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, most states will invalidate it when they see a couple has divorced. That’s sometimes not so for beneficiary designations. If you’ve split and forgotten to change your beneficiary on your 401(k), in some states your ex will get your cash. But under a 2008 change in New York state law, divorce revokes the beneficiary designation of your former spouse.
CORRECTION: An earlier version of this article said divorce did not revoke a 401(k) beneficiary designation.
DON’T FORGET ABOUT HEALTH CARE
Health care 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.
Consider 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.