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Divorce After Retirement: Reboot Your Financial Life

Making the Most of a Fresh Start and Overcoming Common Financial Challenges

The term “gray divorce” is enough to make you cringe, but the reality of divorcing late in life is so much more complex, especially for women.  On the one hand, being on your own opens doors to an entirely new lifestyle, one that some women have never had the chance to experience, if they went from a childhood home, to college, to a marital home (or skipped college and simply got married).  You may find your newfound freedom exhilarating after so many years spent raising a family and compromising with a spouse.

That said, there are also several challenges you’ll face when you divorce later in life, from questions of who you are without a spouse and where you go from here, to a host of financial minefields.  Whether you’re the one who wants to leave, you’ve been blindsided by your spouse, or the divorce is the result of mutual reflection and agreement, you know it’s going to be difficult to separate your lives and your assets after years of marriage.

Not only that, but when you’re nearing the age of retirement, you have to consider the fact that your income and your ability to save are about to be impacted significantly, with or without divorce (although benefits like Medicare and SSN are imminent).  This can be frightening, but it’s not all bad.  When you understand common financial mistakes you might make during the divorce process, you can find ways to avoid them and secure your future – a future that allows you a certain freedom to explore interests you may have set aside for marriage and a family, and perhaps even find love again.

The Statistics on Gray Divorce

Over the last few decades, divorce in general has seen a decline, but the percentage of those seeking divorce in their fifties and sixties has increased.  In fact, it has doubled.  Why are more couples deciding to divorce later in life?  There could be a number of reasons.

In some cases, couples determined to stay together in the interests of children have seen the last of their offspring leave the nest and decided to finally call it quits.  Others have realized their reasons for being in a relationship originally are no longer relevant as they reach a new stage in life.  Then there’s the fact that people are living longer, so that a lifetime of marriage simply may not make sense anymore.

Financial problems, infidelity, addictions, and other issues may also play a role, and the truth is, divorce simply doesn’t hold the same social stigma it once did, allowing couples that aren’t happy to end the marriage and seek new lives apart.


Common Financial Mistakes

The decision to divorce is never easy, but for older couples, it can be extra painful on the financial front.  Senior women are particularly susceptible to nasty surprises during the divorce process, especially if they’ve been stay-at-home moms and had little knowledge or control of finances.

The best way to weather the storm and come out ahead financially is to exercise due diligence and avoid common mistakes.  First and foremost, you need to get all your ducks in a row.  This means listing all of your assets and debts prior to divorce.

You need to know what you own, what you owe, the makeup of your investments, retirement accounts, and life insurance policies.  All can come into play as you separate assets during the divorce.  Unfortunately, you may uncover debts like second mortgages and credit cards you didn’t know existed, if you weren’t the one managing finances, but you’ll also have a clear idea of all marital assets so you can get your fair share.

It’s also wise to consider your tax liability before you choose how to manage any money you may receive as a result of your divorce.  If you split retirement funds, for example, it’s best to roll that money over into suitable accounts, such as a Roth IRA, to avoid high taxation (unless you choose an option like a qualified domestic relations order, or QDRO, that allows for early withdrawal without penalty).

If you are awarded alimony, a lump sum might sound great, but taking measured payments over time may reduce the amount you pay in taxes.  You also need to consider what your expenses might be moving forward, and one area you can really come out ahead is by selling property instead of hanging onto it.

Even if you own a family home, keeping it can mean paying your spouse half the value, not to mention continuing to pay for utilities, insurance, property tax, and maintenance and repairs that you may no longer be able to afford.  It’s a personal choice, but selling could allow you to find a much more affordable place to live and avoid significant financial woes as you start your new life.

Keep in mind, you may also have to return to the workforce, or if you’re already working, rely on far less income than you’re used to.  Making wise financial decision during the divorce process can help to ease the transition to single life and a single-income household.


Planning for a Bright Future

It’s been said that you reach a certain age where the scales between gains and losses start to tip in favor of the latter.  This outlook can make it hard to look forward and plan for your future.  However, with women living longer than men, late life divorce can leave you with many years to fill, and you can’t just sit around and wait for the end.

While divorce may naturally leave you with less money than you had before, sound financial planning and the help of an experienced divorce attorney could alleviate some of the burden.  From there, you can start to envision your personal future in a new way.

While emotionally and financially difficult, divorce can also be liberating.  With children grown and out of the house, and no spouse to confer with, you’ll enjoy a level of independence impossible in most marriages.

You can try new things, make new friends, consider new love interests, and do things you never even considered when you were married.  Rediscovering yourself after divorce is sure to be a profoundly personal process at any age, but when all you have to worry about is yourself and what you want in life, you may ultimately find yourself happier than you’ve ever been before.

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