13 Mistakes to Avoid When Divorcing Over 50
This article will look at 13 mistakes to avoid when divorcing over 50. If you wish to skip our detailed analysis on the financial implications of a gray divorce, go to 5 Mistakes to Avoid When Divorcing Over 50.
Financial Implications of a Gray Divorce
The ever-evolving complexities of modern life are reshaping the narrative surrounding how older individuals navigate the journey of aging. Many of these adults are now reconsidering their "happily ever after," wishing to make the most of the time they have left. Moreover, attitudes in people over 50 are increasingly shifting in support of divorces, highlights a study published in 2020 in the Journal of Family Issues.
This demographic trend of rising divorce rates in couples over 50, known as gray divorce or silver splitting, is rising and turning into a revolution. Susan Brown, professor of sociology and director of the Center for Family and Demographic Research at Bowling Green State University in Ohio, notes that 36% of people getting divorced are 50 years or older. As of April 2021, the US Census Bureau notes that 34.9% of people who got a divorce in the previous calendar year were aged 55 and above. The question is, why are couples aged over 50 increasingly being inclined towards a divorce?
Susan Myers, a divorce attorney in Houston with decades of experience, notes that there are plenty of reasons why her clients call it quits, as reported by CNN.
“I had one client tell me, ‘I do not want to die next to that man – I’m out”.
Many clients well off in their 80s believe that the rest of their lives that they have left is too precious to be spent with the wrong person. Yet others have suffered abuse, drifted apart, or even discovered shocking misdemeanors about their partners. As such, the grim picture of getting divorced after 50 often involves navigating complex financial and emotional challenges, as couples confront the realities of late-life separation.
Financial consultants such as those by The Charles Schwab Corporation (NYSE: SCHW) can help couples who are divorcing to adjust their financial plan and fine-tune investments to stay on track. As stated by Kiplinger, the longer a couple has stayed together in marriage, the more assets they have acquired over the years, and the more expensive their divorce procedure is going to be.
Couples can spend a crazy $200,000 or more in legal fees while fighting for real estate worth millions of dollars. An amicable divorce can cost a couple anywhere between $25,000 to $50,000 on average. Moreover, gray divorces are financially devastating for both men and women, affecting the latter more than the former. Brown, also the co-director of the National Center for Family & Marriage Research, reports that the standard of living for older women who divorce declines by a whopping 45%, compared to a 21% decline faced by older men. This implies that surviving divorce after 50 as a man is much easier than it is for a woman.
Women also suffer because historically, they have been earning much less than what men earn. CiCi Van Tine, a divorce attorney with Davis Malm & D'Agostine in Boston, notes how
"Divorce is a financially devastating situation -- 50% of the assets, 50% of the income. It's just math,"
As a result, women fall into poverty because they haven't worked all their lives due to maternal duties or simply living as a housewife. Bowling Green researchers further note that such women can count on less than $14,000 per year in Social Security. Thankfully, there are many places where individuals can live on social security only.
Retirement Savings and Social Security
Couples who are married for 10 years or longer can claim social security benefits from their ex-spouse. The Charles Schwab Corporation (NYSE:SCHW) notes that the law controls such handling of social security benefits and is rarely open to interpretation.
It further notes that if the couple was married for at least 10 years before splitting, the ex-spouse could apply for monthly benefits worth up to 50% of the higher earner's full retirement age benefit. (If the lower earner remarries, however, he or she forgoes any claim to such benefits in most cases).
Morgan Stanley (NYSE:MS) also notes that if couples do not have sufficient assets accumulated in order to live comfortably late in life, they will, in turn have a difficult time building an adequate retirement portfolio. Expenses such as long-term care are high on one’s priority list, which should be duly accounted for. As such, it is important to understand the value of assets and retirement accounts and their potential tax implications. Such clarity can allow individuals to be clear in the next phase of their life following a divorce.
Since the financial stakes for couples who divorce after 50 years of marriage are high, The Charles Schwab Corporation (NYSE:SCHW) advises that individuals must seek advice and guidance from a financial advisor who can help them get a financially secure life. There are many financial challenges that may arise, such as increased retirement spending thanks to their newly found freedom, inflation, and factors such as alimony and even taxes.
Moreover, many alternatives to divorce for older couples are offered. Some of these include annulment, separation, conscious uncoupling, and mediation. These alternatives can help couples understand the financial and emotional implications associated with going through a divorce.
Photographee.eu/Shutterstock.com
Methodology
In order to compile the list of 13 mistakes to avoid when divorcing over 50, we have gathered information from financial service companies such as The Charles Schwab Corporation (NYSE:SCHW) and Morgan Stanley (NYSE:MS), along with financial websites and media companies like Yahoo Finance, Investopedia, and Forbes, amongst others.
A consensus approach was used to gather and score mistakes. Each time a source recommended a mistake, it was awarded by a point. Finally, they have been ranked from the lowest to the highest scores.
Without further ado, here are the 13 mistakes to avoid when divorcing over 50:
13. Forgetting about health insurance
Insider Monkey Score: 10
Forgetting health insurance can leave you without coverage, strain your finances, and deplete your retirement funds. Having no insurance will also result in limited access to care. Moreover, obtaining coverage will be more challenging and expensive, especially if you develop health issues after losing insurance. This is one major mistake to avoid when divorcing over 50.
A partner who was previously covered by their spouse-provided insurance plan will have the right to continue coverage for a set period after the divorce, likely at a higher cost. This coverage called COBRA, may be expensive but is also negotiable. Therefore, it is important to pay attention to related deadlines. Other options that an individual can pursue include employer insurance or signing up for the state's healthcare exchange under the Affordable Care Act.
12. Maintaining ownership of the former residence
Insider Monkey Score: 10
Holding onto the house may not be the wisest thing to do after a divorce. Doing so will possibly preclude other important needs and finances, such as a sound retirement plan. In addition to expenses such as taxes and mortgage, keeping the house also involves unexpected overheads related to upkeep and replacement. This is especially true for a house that has been lived in for more than two decades, possibly for a couple going through a gray divorce. Therefore, it is best to talk to a financial advisor about the responsibilities and implications of owning the house.
11. Disregarding potential tax implications
Insider Monkey Score: 11
Every financial decision made during a divorce has tax implications, and you’re likely to face legal and financial consequences if you don't avoid this financial mistake when divorcing over 50. For instance, if a couple divides their assets without considering their tax consequences, they may face unexpected capital gains taxes or other tax liabilities and penalties. On the other hand, failing to optimize tax allocation may also mean losing out on certain valuable tax benefits, such as credits, deductions, and exemptions offered to divorced individuals. Moreover, disregarding tax implications may also impact the value of your retirement assets and impact your ability to live a comfortable retirement.
10. Skipping asset inventory
Insider Monkey Score: 12
Retirement plan assets are usually marital property, implying their division between the divorcing parties. They include individual retirement accounts (IRAs), 401(k) plans, and defined benefit plans as well. For a married couple, one partner is usually more aware of the value of their assets, cash available in their savings accounts, and other details. If you're unaware of these details, it is best to have an inventory of all assets for your financial well-being. If you don't avoid this mistake when divorcing over 50, it may lead to tax implications, impact your credit score, and even result in legal issues.
9. Lacking an advisory team
Insider Monkey Score: 13
A team of financial and professional advisors can be the most valuable asset during a divorce. In particular, an attorney, a financial advisor, and a tax consultant are optimal to help you make the right decisions around your divorce. Lacking an advisory team will result in uneven distribution of property, unexpected tax liabilities, tax compliance issues, and even impact your retirement plans. Financial companies such as Morgan Stanley (NYSE:MS) and The Charles Schwab Corporation (NYSE: SCHW) can provide couples with financial advice during this difficult period.
8. Misunderstanding divorce cost-sharing
Insider Monkey Score: 14
Understandably, you want to go through a divorce as quickly as possible, but overlooking or having miscommunication regarding cost-sharing can result in an uneven distribution of financial responsibility. It might also lead to disputes and conflicts between the spouses and prolong the divorce proceedings along the way. Furthermore, since divorce in late life requires careful financial planning, such misunderstandings will only negatively impact your retirement savings and goals.
7. Not Realizing joint debt liabilities
Insider Monkey Score: 15
Disregarding joint debt liabilities is a big mistake to avoid when divorcing over 50, which can result in unnecessary financial strain, credit damage, financial stress, legal consequences, and, in extreme cases, seizure of assets. Your credit score will be impacted in case of non-payment, and there may be legal disputes and potential court actions as well.
6. Underestimating a future pension’s value
Insider Monkey Score: 16
Overlooking the value of a future pension can result in inadequate savings for retirement and additional retirement accounts and render you limited financial flexibility to meet unexpected finances along the way. Even worse, you may even have to delay your retirement if you realize later in life that your pension is insufficient to allow a comfortable retirement. The Institute for Divorce Financial Analysts (IDFA) suggests the nonemployee spouse to receive their share of a future benefit, present valuing the pension and offsetting it, or both.
Click to continue reading and see the 5 Mistakes to Avoid When Divorcing Over 50. Suggested Articles:
Disclosure: none. 13 Mistakes to Avoid When Divorcing Over 50 is originally published on Insider Monkey.