In the past few months we have met with a number of professional women going through divorce later in life. This can be a game changer when it comes to financial security. In every case assets were being split and lifestyle was affected. We want to share what the issues are that Gray Divorce causes financially, and steps you can take to retain financial security.
There is a new trend in relationships as a result of our longevity. It’s called Gray Divorce and its divorces that are happening to folks over the age of 50. In fact, divorces over age 50 are happening at twice the rate they did just a generation ago. And it’s causing substantial financial risks for women.
The average American is now living to age 82, which means people are living long into retirement. It also means people are often making changes to their relationships. When it comes to marriages, women are initiating two thirds of all divorces over the age of 50. This adds a new, substantial risk to plan for. Why? Because while men will achieve or exceed their marital standard of living after divorce, women often do not. In fact, the average divorced woman’s income falls by more than a fifth. It’s essential these women get financial guidance when transitions like this occur.
What are some of the issues unique to Gray Divorces?
1. Guidance: 70% of the time in divorce, wives leave their financial advisor, largely because many believe their advisor’s loyalty lies with their ex-spouse. Having an advisor in this space is critical to preserve financial security, so find a planner you trust who listens to your concerns and understands the guidance you need.
2. Retirement spending: While you might expect expenses to drop when there is only one person now, instead of two, often the opposite it true. Increased travel, dining out, and spending in other ways as a result of new found independence often happens. We also know that healthcare costs for women are greater than men later in life, so you’ll want to make sure you have plan in place for these added costs.
3. Alimony: For those who have court-ordered alimony, it is not indefinite. At most it will be paid out for half the length of the marriage and is often curtailed at retirement. Having a budget around your actual income is critical.
4. Retirement income: Splitting assets in divorce often means splitting retirement funds, which means splitting income. Having a plan around your reduced income can make the difference between being financially secure or not.
5. Taxes: Rather than filing taxes with the more favorable Married Filing Joint status, divorce means tax status changes to Single. This means a likely increase in taxes due, and can be a hit to income, especially if most retirement income is coming from tax deferred accounts.
6. Details: Its critical to make sure assets are actually split based on what the divorce decree mandates. Custodial errors happen, which can result in a large gap between what you should end up with, and what you do end up with.
7. Financial security: Any financial plan you had while married will need to be revised for your long term financial security. Your personal goals and wishes will need to be revisited with your revised income in mind. Any gaps in reaching those goals will need to be addressed with new solutions. A planner can run projections on where you are now, before the split, and where are looking to be after the split. This allows you come up with a budget that will work with the income you have and make sure you don’t run out of money.
Late stage divorce comes with its own issues and tends to impact wealth more than divorces earlier in life. Make sure you have guidance to help you navigate this transition so you maintain your financial security. If you’d like to learn more about how we help professional women navigate the financial implications of Gray Divorce, please reach out to us at WealthChoice.
