Gray Divorce: The Beginning of a New Financial Life

Even though overall divorce rates are declining, there has been a rise in divorces for older Americans. In fact, the divorce rate for U.S. adults aged 50 and older has roughly doubled since 1990.¹

Many in the baby boomer generation may be reprioritizing their lives and gaining a greater sense of self and what they want out of their remaining years. People are living longer, and divorce later in life is becoming more accepted in society. With both spouses facing retirement, many feel that going their separate ways is often the best solution.

Divorce can also be an incredibly hard decision that may affect your long-term plans and finances. After a long marriage in which a couple has accumulated wealth in the form of real estate and investment accounts, including Individual Retirement Accounts (IRAs), 401(k)s and 403(b)s, reconfiguring a new financial game plan may be challenging.

Women Can Hit More Roadblocks

For various reasons, women, on average, earn less than men, have saved less for retirement and statistically live longer. Therefore, divorce can put women in a financially vulnerable position. Women experienced a 45% decline in their standard of living (measured by an income-to-needs ratio), whereas the standard of living experienced by men dropped by just 21%.² Traditionally many men were the primary breadwinners during the marriage, while many women stayed at home and raised their children or took care of other family members.

Steps to Prepare and Protect Yourself Financially

If you or someone you know is going through a “gray divorce,” it is important to understand your comprehensive financial picture going forward. Living standards will most likely change, so it helps to look at income, expenses, assets/debts, retirement accounts and life insurance policies. Here are some additional items to consider:

1. Update your beneficiary designations. This is often overlooked but could be a costly one if the designation doesn’t match your intentions.
2. What will your new life look like? Do you plan to retire or will you be working longer? Whatever the case may be, you may need to reassess your financial plan every six months.
3. Think about your living situation. Determine if downsizing is a better option to free up some additional income. Your home is one of the largest fixed expenses and, with potentially less income, you may need to move into a more affordable home.
4. Divorce can impact Social Security benefits if you have been married for at least 10 years. If one spouse earned more than the other, the spouse who earned less may be able to claim benefits later in life if that spouse remains unmarried.

Divorce is an extremely emotional process. Your life as you know it will change and it can be hard at first to get your footing. Having your finances in order may help give you some peace of mind. It takes time to heal from a divorce, so be patient with yourself. You are about to step into your new life, a life you get to create. At Jemma Financial, we can help ease the burden by assessing your financial situation and help navigate a new financial path.

1. “Led by Baby Boomers, divorce rates climb for America’s 50+ population,” Pew Research Center, 3/9/17.
2. “The Economic Consequences of Gray Divorce for Women and Men,” National Library of Medicine.