With divorce rates steadily increasing for older Americans, academics and financial professionals are examining just how expensive these separations can be for people 55 and older.
Rise of the Gray Divorce
The term “gray divorce” refers to marriages that end later in life, usually over the age of 50. And since the 1990s, the rate of gray divorces in the US has ballooned. Analysts believe these divorces are leaving many older people in dire financial straits.
Doubled and Tripled
Since the 1990s the rates of divorce for Americans over 55 has doubled, and divorce for those over 65 has tripled over the same period.
Surprising Age Difference
These numbers, provided by federal data, are surprising – especially since divorce rates for younger Americans have dropped in the last 3 decades.
A “Remarkable” Phenomenon
Susan Brown, a professor of sociology at Ohio’s Bowling Green State University, has been studying this phenomenon. “One in 10 people getting divorced today is 65 or older. That is remarkable. A growing share of aging adults will be aging alone,” she told USA Today.
Demographic Changes to Blame
According to researchers, demographic changes are to blame, as US couples live longer, stay healthy longer, and marry later rather than earlier.
Considerable Cost
However one of the most significant discoveries surrounding this phenomenon is the financial cost of gray divorce. The cost of divorce is higher for older Americans than younger ones, and it is costlier for women too.
Steep Decline in Living Standards
According to a 2020 study by Brown and her colleagues, men will see their living standards decline by 21% post-divorce, and women by 45%.
Bad for Both
For both parties, their wealth will be cut in half. “I haven’t seen a scenario in which either partner is better off financially,” said financial planner Elizabeth Windisch.
Why It’s Worse for Women
The financial cost for women is compounded by a number of factors. Women are more likely to initiate a gray divorce, more likely to have custody of any underage children, and are likely to have worse job prospects than their husbands after 50, and consequently less earning potential.
Mitigate the Worst Effects
There are several things that older divorcees can do to mitigate the financial damage of a gray divorce, according to several certified financial planners.
Make A New Retirement Plan
Retirement planning tends to go down the drain when you lose half of your finances in a divorce. While retirement savings are often distributed equitably between both parties, those savings can be eaten up in the post-divorce fallout.
Get Back on Track
“It’s double the expense for pretty much everything,” said financial planner Michelle Crumm. When one of her older clients went through a divorce, she told her to prioritize “getting her retirement plan back on track” and “maxing out everything she can” in terms of retirement accounts.
Rethink Your Expenditures
“She realizes she has a lot of work to do to catch up,” Crumm said of the same client. “She leases a car every year. So, we’ve had the conversation, ‘Should you buy a car?’ Maybe I go on vacation in the United States instead of a European Vacation.”
Do You Need to Return to Work?
Patti Black, a Birmingham-based financial planner, advised divorcees to calculate whether they will need to go back to work to maintain their finances, as many older divorcees are either retired or gave up work decades earlier to be homemakers.
A Tricky Situation
One of her clients was in the latter situation. She realized she would never be able to achieve the level of income that her husband had earned to keep their home and lifestyle afloat.
Budget Cutting and Downsizing
“She had not worked in 25 years, I think,” Black said. “We worked very hard to come up with a plan so that she didn’t have to go back to work.” This plan included cutting her budget significantly and downsizing to a smaller home.
Make a Decision About the Family Home
Divorcees should weigh up the costs of owning their home before choosing to sell or buy out the other party. If the mortgage is not paid off, then the person who ends up with the house will be solely responsible for mortgage payments, insurance, property taxes, and maintenance. Consider whether keeping it is worth the cost.
Buying Again May be Difficult
On the other hand, choosing to sell the house and buy a new one also comes with its difficulties. Depending on when you bought the first house, you will likely be buying a new house at a much higher interest rate.
Consider the Consequences
Divorce can pose many complications for the divorcees, and these issues tend to be compounded as you get older. It’s not a decision that should be made lightly.
Choose Wisely
“Count the costs,” suggested Patti Black. “Maybe you try to ride it out. Maybe the money would be better spent on marital counseling than on a divorce attorney.”
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.