The divorce rate has doubled since 1990 for Americans over age 55. For couples over 65, the rate has tripled.
And in financial terms, few “gray divorcees” are better off.
Gray divorces have increased in recent decades, federal data show, even as the divorce rate among younger Americans has declined.
“One in 10 people who get divorced today is 65 years old or older. “That’s remarkable,” he said. Susan Brown, distinguished professor of sociology at Bowling Green State University in Ohio. “An increasing proportion of older adults will age alone.”
Several demographic factors shaped the gray divorce phenomenon, researchers say: The American population is aging. People stay healthy longer. Couples marry later.
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Gray divorce has a high cost
In dollar terms, divorce is expensive for anyone. However, for older Americans, the costs are higher.
“I haven’t seen a scenario where either partner is better off financially,” he said. Elizabeth Windischa certified financial planner in Denver.
A man can expect his standard of living to be 21% decrease after a gray divorce., according to research by Brown and colleagues. A woman’s standard of living will fall by 45%. Both partners see their wealth reduced by half.
Women seem more likely to initiate a gray divorce, Brown said. And women tend to fare worse after separation, at least financially. Women are more likely to assume custody of children, along with those costs. Women who divorce after age 50 tend to have less work experience than their partners, which means less chance of future income.
Here are some of the biggest financial challenges facing older Americans going through divorce, and tips for dealing with them.
Rebuilding your shattered retirement plan
Problem: Gray divorce can ruin your retirement account, leaving you little to no time to rebuild.
Solution: Make a new plan. If you haven’t retired, save aggressively to replenish your savings.
In a gray divorce, a couple’s collective retirement savings can be redistributed in equal shares, one for each partner.
That may not sound so bad, until you consider all the other expenses that come with divorce: finding new homes. Looking for new health insurance. Pay legal bills.
“It’s double the expense for almost everything,” he said. Michelle Crummcertified financial planner in Ann Arbor, Michigan.
Crumm represented a client who was divorced at age 50. She was a high-level executive. Her husband was a father and housewife.
“She had to give half of her 401(k) to him. She has to pay him alimony,” Crumm said. “On paper it looks like this woman makes a lot of money, but in reality there isn’t much left.”
Crumm told his client that his top priority should be “getting his retirement plan back on track.” That meant “maximizing everything he can” for retirement savings, diverting more of his income into that slimmed-down 401(k).
“She realizes she has a lot of catching up to do,” Crumm said. “She rents a car every year. So, we’ve had the conversation: ‘Should you buy a car?’ Maybe I’ll go on vacation to the United States instead of Europe.”
The client’s oldest daughter is about to start college. Because of the mother’s high salary, the daughter will likely pay full price wherever she enrolls.
The client wants to send his daughter to a private institution. Crumm advised him instead to take public: the iconic University of Michigan. charges around $35,500 in in-state tuition, fees and living expenses, less than half the total cost of an elite private university.
Crumm put it bluntly: If the daughter spends four years at a private college, the mother may have to delay her own retirement by that many years.
“She originally said 62,” Crumm said. “I said, ‘We’re probably between 65 and 67.’”
Now, mother and daughter face a difficult decision.
Return to work after a long break… or not
Problem: How to make money after divorce if you haven’t worked in years.
Solution: Find out if you can live comfortably without going back to work, even if that means a tighter budget.
A gray divorce can be especially discouraging for an aging spouse who, decades earlier, gave up his or her career to start a family.
Patti BlackA certified financial planner in Birmingham, Alabama, worked with a client in her 50s whose husband of three decades filed for divorce.
The woman was living in her dream home, now an empty nest, and counting down the years until a prosperous retirement.
“I don’t think I’ve worked in 25 years,” Black said.
The woman soon realized that she would never find a job with a salary even close to what her husband earned.
“We worked very hard to come up with a plan so she wouldn’t have to work again,” Black said. That meant giving up her dream home, buying a smaller one, and living on a shoestring budget.
Now, you’re waiting for your dream home to sell.
Divide the family home
Problem: What to do with the marital home.
Solution: Consider all the costs of owning and maintaining that home before deciding who, if anyone, will get it.
In a gray divorce, any marital home can seem like an asset… or a burden.
Let’s say the house has $250,000 in equity and 10 years left on the mortgage. If the agreement gives the home to one spouse, then that spouse will likely also inherit the mortgage payments. And property taxes. And sure. And maintenance.
If the spouse chooses to refinance the mortgage, that could mean giving up a loan with a historically low interest rate for a new one at 2024 rates, which are much higher. The same problem arises if the couple chooses to sell the old house and buy two new ones.
“This can be a big problem for divorcing couples,” he said. Monica Dwyera certified financial planner in West Chester, Ohio.
If the numbers don’t work, experts say, consider downsizing.
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Gray divorce raises many other financial complications, from Social Security benefits to health insurance, estate plans and credit card debt.
It’s almost enough to make you think twice.
“Count the costs,” Black said. “Maybe try to tough it out. “Maybe it would be better to spend the money on marriage counseling than on a divorce lawyer.”
Daniel de Visé covers personal finance for USA Today.