The media calls it “The Gray Divorce.” Married couples in their later years are divorcing, some after decades together. In 2014, The National Center for Family and Marriage Research at Bowling Green State University found that the divorce rate for people age 50 and above have doubled since 1990. For those over 65, the numbers were even higher.
No matter what label the media wants to give it, divorce presents difficult decisions, many of them financial. If you are a woman going through a Gray Divorce, here are 4 things to know that may help give the process a bit of a silver lining.
Retirement and Social Security
Retirement savings is considered an asset, no matter what the reasoning is for a divorce. As an asset, the thought is that it should be split 50/50. However, some spouses may offer more of their retirement accounts to gain other assets in the divorce, such as the house or recreational property. Retirement assets can grow without taxes being paid, but upon withdrawal, taxes may need to be paid. Keeping the potential growth and taxation of the assets received are important factors when dividing your retirement assets or giving up retirement assets in favor of other assets.
Social Security benefits are not considered an asset and will not be part of the settlement agreement. However, certain Social Security rules can aid post-divorce retirement income. If the marriage lasted 10 years or more, you are 62 years of age and your former spouse had the higher income, you may be eligible to draw benefits from your ex-spouse’s benefits after your divorce. This is great news for many women that worked only part-time or not at all while taking care of the home.
Note, Social Security planning in a divorce can have special nuances so make sure you understand the pros and cons before you start drawing on the assets.
The House as an Asset
Women are often tied to the home in many ways, and during a stressful time such as divorce, may not want to give up their ties to it. It is important, however, to think about how to pay for this asset—expenses could include the mortgage, real estate taxes, insurance and basic upkeep, as well as major repairs. Are there savings enough to cover these expenses, or will income be sufficient to cover the expenses? Is it possible to refinance the mortgage in an individual name, if the mortgage is currently jointly held? Would it be more beneficial to sell the house and take the equity to provide a more flexible retirement nest egg? Remaining flexible when dividing assets, and trying to make decisions based on financial reality rather than emotional ties can help people going through a divorce come out with a stronger financial foundation
The current real estate market may also be a factor in the decision on how to deal with the house. Depending on the market area, a house could remain for sale for a year or even longer. One consideration may be to keep the house, sharing the expenses until the market improves.
Spousal Support and Long-term Marriage
For women coming out of a long-term marriage, spousal support can be a boon to post divorce income. Spousal support is more likely to be awarded when a long-term marriage dissolves, based on factors such as the length of accustomed standard of living and financial independence one spouse had on the other. However, if both spouses were found to be equitably contributing financially to the marriage, spousal support may not be awarded.
Just like assets, there are debts obtained jointly in a marriage that are the obligation of both former spouses after a divorce. Credit card companies aren’t bound by divorce decrees. This means that you may be libel for the debt your former spouse decides not to pay.
Many divorcing couples pay off joint cards together or divide up the debt and transfer it to personal cards, removing liability for a former spouse’s debt. Hidden debt can sometimes pop up if one or both former spouses forget to cancel all the cards. A quick inventory of your wallet can save a future hassle. Be sure to speak with your divorce attorney regarding the rules about debt in your state.
A Fresh Start
While a late-life divorce may be challenging, for many women, it is a new lease on life. The financial end of the process may seem confusing, but if you find yourself in this position, you are not alone. Schedule a consultation with a financial advisor who understands the unique concerns of women. Now is the time to discuss your options and empower your future.
Linden Oak Wealth Partners offers fee-only financial advising customized for women, in particular, women in transition. Our goal is to create an environment where financial planning is efficient, simplified and easy to understand. We want clients to feel empowered and engaged every step of the way. Please contact us to schedule an initial consultation today.
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