Many Americans are divided after 50. But at what cost?

Many Americans are divided after 50. But at what cost?

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The divorce rate has doubled since 1990 for Americans over 55. For couples over 65, the number has tripled.

And in financial terms, some “gray divorcees” are better off.

Gray divorce has increased in recent decades, federal data show, even as the divorce rate for young Americans has declined.

“One in 10 people getting divorced today is 65 years old or older. That’s amazing,” said Susan Brown, distinguished professor of sociology at Bowling Green State University in Ohio. “A growing share of older adults will age alone.”

Several demographic factors are shaping the gray divorce phenomenon, researchers say: The American population is aging. People stay healthy longer. The couple got married later.

A gray divorce is costly

In dollar terms, divorce is expensive for anyone. However, for older Americans, the costs are higher.

“I’ve never seen a scenario where both partners are better off financially,” says Elizabeth Windisch, a certified financial planner in Denver.

A man can expect his standard of living to drop by 21% after a gray divorce, according to research by Brown and his colleagues. A woman’s standard of living will drop by 45%. The two partners saw their wealth cut in half.

Women seem more likely to initiate a gray divorce, Brown said. And women tend to be worse off after a breakup, at least in financial terms. Women are more likely to take custody of the children, along with the costs. Women who divorce after 50 have less work experience than their partners, which means less potential for future income.

Here are some of the biggest financial challenges facing divorced older Americans, and tips for meeting them.

Rebuild your broken retirement plan

Problem: A gray divorce can destroy your retirement account, leaving you with little or no time to rebuild.

Solution: Make a new plan. If you are not yet retired, save aggressively to replenish your savings.

In a gray divorce, the couple’s collective retirement savings can be redistributed into equal shares, one for each spouse.

That might not sound so bad, until you consider all the other costs that come with divorce: Finding new homes. Shopping for new health insurance. Payment of legal fees.

“It’s double the cost of almost everything,” says Michelle Crumm, a certified financial planner in Ann Arbor, Michigan.

Crumm represented a client who was divorcing at 50. He was a high-level executive. Her husband is a stay-at-home dad.

“He has to give half of his 401(k) to her. He has to pay her alimony,” Crumm said. “It looks on paper that this woman makes a ton of money, but in reality, she doesn’t There’s plenty left.”

Crumm told his client that his top priority was “getting back on his retirement plan.” That means “maxing out all he can” for retirement savings, shifting a larger portion of his income toward a reduced 401(k).

“He knows he has a lot of work to do to catch up,” Crumm said. “He rents a car every year. So, we talked, ‘Are you going to buy a car?’ Maybe I’ll take a vacation in the United States instead of a European Vacation.”

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 her daughter to a private institution. Crumm advised him to go public: the flagship University of Michigan charges about $35,500 in in-state tuition, fees and living expenses, less than half the full cost of an elite private college.

Crumm is blunt: If the daughter spends four years at a private college, the mother can delay her own retirement by several years.

“He originally said 62,” Crumm said. “I said, ‘We’re probably looking at 65 or 67.'”

Now, mother and daughter face a difficult choice.

Back to work after a long break — or not

Problem: How to earn money after divorce if you have not worked for many years.

Solution: Consider if you can live comfortably without going back to work, even if it means a tighter budget.

A gray divorce can be especially scary for an older spouse who, decades ago, left a career to raise a family.

Patti Black, a certified financial planner in Birmingham, Alabama, is working with a client in her 50s whose husband of three decades is seeking divorce.

The woman lives in her dream home, now an empty nest, counting the years to a prosperous retirement.

“He hasn’t worked in 25 years, I think,” Black said.

The woman soon realized that she would not be able to find a job with a salary that even came close to her husband’s income.

“We’re working hard to come up with a plan so he doesn’t have to go back to work,” Black said. That means giving up the dream home, buying less and living on a shoestring budget.

Now, he is waiting to sell the dream house.

Division of the family home

Problem: What to do in the marriage house.

Solution: Consider all the costs of owning and maintaining that home before you decide who will get it — if anyone.

In a gray divorce, any marital home can feel like an asset – or a burden.

Let’s say the home has $250,000 in equity and 10 years left on the mortgage. If the settlement conveys the residence to a spouse, then that spouse will likely inherit the mortgage payments as well. And property tax. And insurance. And maintenance.

If the spouse chooses to refinance the loan, that may mean giving up a loan with a historically low interest rate for a new one with 2024 rates, which are higher. The same issue arises when a couple chooses to sell the old house and buy two new ones.

“This can be a big problem for divorcing couples,” says Monica Dwyer, a certified financial planner in West Chester, Ohio.

If the numbers don’t add up, experts say, consider downsizing.

Think you’ll live past 70? Good luck. Why do most of us retire early?

A gray divorce causes many other financial complications, from Social Security benefits to health insurance, estate plans and credit card debts.

This is enough to make you think twice.

“Count the costs,” Black said. “Maybe you should try to ride it. Maybe the money is better spent on marriage counseling than on a divorce attorney.

Daniel de Visé covers personal finance for USA Today.

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