Divorce is never an easy process, but for couples over the age of 50, it can present an entirely unique set of challenges. Referred to as “gray divorce,” this growing trend has led to more and more individuals navigating the complex financial and emotional landscape of starting over in the latter part of life. The stakes can feel particularly high because after spending decades building a life together, many couples must now figure out how to untangle their assets, income, savings, and retirement plans. Whether you or someone you know is facing a gray divorce, it’s important to understand the implications so you can make informed decisions and protect your financial future.
1. Your earnings may be peaking
For many people, the decade between 50 and 60 is when their earning potential peaks. You may be making more money than you’ve ever made before, but that may also mean your monthly support obligation may be increasing. If one spouse is unemployed, works part-time or is in a low-paying career, the higher earning spouse may not be happy to hear just how much of those peak earnings will be earmarked for spousal support…support that might last well into retirement.
2. Your savings account may be growing
Couples in their 50’s may already be empty-nesters, or soon to be. Once the kids are out of the house, couples are often able to start saving much more money. Divorce at this age can change the entire financial picture for older couples if they move from a dual income family to being a single earner. Saving may become more difficult with no partner to help share expenses. Just when you think you’ve survived the child raising years and you can really start saving for retirement in earnest, you may find yourself having to come up with an entirely new plan.
3. Managing Retirement Accounts and Investments
Dividing retirement accounts and investments can be one of the most complex aspects of a gray divorce. These assets often represent a significant portion of a couple’s net worth and can be tricky to equitably distribute. There are different types of retirement accounts, each with its own set of rules and tax implications. Some retirement accounts, such as pensions and 401(k) plans, may need to be divided using a Qualified Domestic Relations Order (QDRO), which is a legal document that specifies how the account should be divided and ensures the non-employee spouse receives their fair share without incurring tax penalties.
For other investment accounts, such as IRAs, the process of dividing assets may be simpler, but it’s essential to carefully consider not only the immediate value of the investments but also their potential future growth. Couples should also be sure to consider whether dividing an asset in a specific way may trigger tax consequences or other financial penalties. Consulting with a financial advisor experienced in divorce can be invaluable in helping you navigate these decisions and protect your financial future.
4. Medical concerns and Health Insurance Changes
Just about the time you may start to experience age-related health issues, a significant concern in a late- life divorce is the potential for losing health insurance coverage, particularly if one spouse has been dependent on the other’s policy. Specific steps need to be taken to ensure that both parties continue to have proper medical care coverage. The first thing to consider is whether you are eligible for COBRA (Consolidated Omnibus Budget Reconciliation Act) benefits. COBRA provides continuation of group health coverage for a limited period post-divorce. This can be a helpful temporary solution, but it is essential to understand that COBRA can be costly and has an expiration date, usually 18 to 36 months after divorce.
Another option is to look into obtaining an individual health insurance policy. If you are over the age of 65 or nearing that age, you should research Medicare enrollment. Regardless of the path chosen, it is important to act promptly to secure new health insurance coverage so you don’t face any gaps in medical care or related financial consequences.
5. Addressing Life Insurance Policies
Life insurance policies should also be carefully reviewed during a late-life divorce. Often, spouses list each other as beneficiaries, but once separated, they may not want their ex-partner to receive these benefits. It is essential to evaluate if any changes need to be made to the policy to reflect the newly-adjusted life circumstances, such as updating beneficiary information, policy ownership, or the amount of the death benefit.
Additionally, many divorce settlements include provisions regarding life insurance policies to ensure that certain financial obligations (like alimony or child support) are met even after the death of the paying spouse. Be prepared to negotiate these details during the divorce process, as they could impact your financial stability later on.
Schedule a Free Legal Consultation
These five considerations are just the beginning for couples facing a gray divorce. If you’re over 50 and seriously considering divorce, call the experienced divorce lawyers at Kirkland & Sommers to discuss all of the potential ramifications of this life-changing decision. Get expert legal advice that’s based on your personal situation and financial picture, and make an informed decision. You may decide it’s better to attempt to reconcile than lose 50% of your net worth just before retirement, or that may not be an option for you. Either way, a legal consultation will help prepare you for what comes next. Give us a call or come by the office to meet with a professional divorce attorney today!