Ending a marriage is complicated in the best of times. Even dissolving shorter marriages can get messy. But the longer a marriage, the more difficult it becomes. People toss around the term gray divorce a lot these days.
What Is ‘Gray’ Divorce?
The term gray divorce has been all over in the last few years. Gray divorce refers to spouses over the age of 50 ending a marriage. Overall, the divorce rate continues to decline. In fact, in 2016, it reportedly hit a 40-year low.
That said, the divorce rate for couples over 50 has more than doubled over the last 20 years. Roughly one-in-four divorces involve couples over 50, while roughly one-in-ten involve couples over 65.
Why Has The Rate Of Gray Divorce Increased?
While every couple has their own unique reasons for ending a marriage, there are reasons why gray divorce is on the rise.
One reason is that, with advances in medicine and an increasing focus on healthy lifestyles, people simply live longer. Divorcing at 50 and beyond still leaves ample room to live a full, exciting life.
Attitudes towards divorce continue to change. As there’s more emphasis on individual fulfillment and happiness, people are less likely to remain in an unsatisfying, unsafe marriage than in earlier generations.
Some couples put off a divorce. People often wait until the kids grow up and leave home before ending a marriage. Others hang in until they hit a certain milestone so particular retirement benefits kick in.
These are just a couple of common reasons why gray divorce has grown in recent years. Again, no two divorces are ever exactly the same. Motives differ from one case to the next, but frequently repeated themes often appear. Similarly, there are a number of recurring issues to be aware of when divorcing later in life.
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Is Gray Divorce Different Than Other Divorce Proceedings?
Divorce at any age follows the same laws, but divorcing later in life comes with its own unique set of problems, concerns, and issues to deal with.
Social SecuritySocial Security benefits are an important piece of the financial puzzle. How long you’re married and when you divorce has big impacts on this particular source of income. Though the court can’t divide these benefits, it’s important to know how gray divorce influences them.
If you were married for at least ten years, are at least 62-years-old, and are currently unmarried, you may qualify to collect Social Security based on your former spouse’s employment history.
This is most common when one spouse earns significantly more than the other.
If your ex dies, you may also be entitled to survivor benefits, though there are stipulations. Again, the marriage must have lasted ten years, you must be unmarried, and you have to be at least 60, or 50 with a disability.
Related Reading: How Is Social Security Handled In Divorce? (In-Depth)
Spousal support is something else to consider in gray divorce. In cases of long marriages with a significant income disparity between spouses, this issue often arises.
If you’re the primary earner in a marriage, the court may award maintenance payments to your spouse. A substantial payment, often impacts retirement.
In some cases, it causes people to have to delay when they stop working and radically alter future plans.
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We don’t always like to admit it, but many of us are getting on in years. With that, there are a variety of health concerns and long-term issues to account for. These are things to contend with in every situation, but gray divorce specifically impacts many.
If you have lingering medical expenses and continuing health care costs, health insurance is sure to be a big concern. In most cases after divorce, you can’t remain on your spouse’s insurance plan. And gray divorce is no exception. As this is an important part of your health and wellbeing, plan ahead of time.
One strategy couples use in this situation is to choose legal separation instead of divorce. In a legal separation, a court order lays out a split between two couples.
This includes dividing property, determining custody if there are minor children, and even awarding spousal support.
Legal separation mimics divorce in many ways, but without actually dissolving a marriage. Because the marriage isn’t technically over, a spouse may continue to receive coverage under the other’s plan. Emphasis on may. This isn’t always the case, so check your specific policy, but it is a possibility.
If you’re eligible for Social Security benefits based on your ex’s work history, you may also qualify for Medicare. Unless you have a disability, however, you won’t meet the requirements until you turn 65.
So, if you divorce after 50, but before 65, preparing for health care is vital. Finding your own coverage can be tricky and costly. This is one expense that you should make sure to include when addressing financial matters in your gray divorce.
Another unpleasant topic related to gray divorce is that as we get older, it gets harder to care for ourselves. Living on our own, maybe for the first time in years, poses risks. We can’t always do everything for ourselves like we used to. This presents logistic and financial concerns.
Caregivers are expensive, whether out-of-home or in-home. So are nursing homes and assisted living facilities. Insurance and Medicare often cover some of these expenses.
Some of us have adult children who can help out. But every situation is different, and these are important factors to take into account.
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Estate Planning And Life Insurance
Estate planning and life insurance are especially important in gray divorce. Determine who has the authority to make decisions regarding your care and property should you ever become incapacitated.
Update your final wishes and determine who you want to carry them out.
A divorce settlement can include agreements to establish trusts, for instance, to account for a grandchild’s education. You can also protect assets you want children to inherit and layout on how to divide the property.
Gray divorce uses life insurance in multiple ways. One way life insurance is often used is as protection for debts and spousal support. The court often designates one spouse as the beneficiary of a life insurance policy to ensure continued care.
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The older we get, the closer we get to retirement. But as with most plans, divorce frequently derails those aims. The older you are when you end your marriage, the less time you have to squirrel away money for retirement.
A key part of divorce is the division of property, where couples split up the shared assets. Retirement benefits fall into this category. 401(k)s, IRAs, and pensions are all on the table.
It’s also much more expensive for two people to live separately than together. After all is said and done, what you put aside may no longer be enough to sustain you. In many cases of a gray divorce, your retirement winds up less comfortable than planned.
Worse yet, you may even have to push it back if you don’t have enough to cover your calculated living expenses.
Gray divorce comes with its own set of complications and concerns. Especially if you’re nearing retirement or already retired. Mistakes here often decimate retirement savings and have a huge impact on your financial future. Here are a few common missteps to avoid.
Not Knowing What You’re Entitled To
When you’re married more than ten years, you may qualify to receive Social Security benefits based on your ex’s work history.
This often applies to other things as well, like pensions. You may be leaving money on the table you didn’t even know existed. It’s vital to educate yourself and learn what assets you’re entitled to.
Raiding Retirement Savings
Retirement savings often look like a big wad of money just sitting there not doing anything. It’s practically begging to be spent, and it’s tempting to dip your hand in that cookie jar a bit early.
Divorces tend to cost a lot, so this desire may grow even stronger when strapped for cash. But that comes with downsides.
Every time you withdraw funds, you eat away at your retirement savings. You need this money to live when you actually retire. Hopefully, you have many years ahead of you, but the more you spend now, the less you have in the future.
You also have to deal with fees, taxes, and penalties for early withdrawals. The pull is real, but people too often fall into this hole during and after a gray divorce.
Ignoring Shared Debt
California is a community property state. This means the court views all assets acquired during a marriage as belonging equally to both spouses. As you might imagine, this has an impact on divorce settlements and the division of property.
The thing is, the law also views debt the same way. If your spouse spent years building up debt in secret, you may be in for a rude awakening. Whether you were aware of it or not, you may wind up saddled with an unexpected burden.
axes are complicated in the best of times. After a gray divorce, ignoring the tax implications of divided retirement benefits adds a whole new layer. Though you think you’re getting one thing, you may wind up with something else entirely.
For example, do you know the differences between a traditional 401(k) or IRA versus a Roth 401(k) or Roth IRA? One’s taxable, one isn’t.
Say you have a $100,000 401(k). The IRS taxes that amount when you remove money, so you wind up with significantly less.
With a Roth IRA, by comparison, you pay the taxes when the money is deposited, not withdrawn.
On paper, a $200,000 IRA and $200,000 Roth IRA may look the same.
In reality, they may provide very different results. This is just one example. Knowing details like this helps you negotiate the best settlement.
For most people, a house is the biggest purchase you ever make. But it’s also so much more than a simple possession. It’s where you live, raise kids, and build a life. During a gray divorce, as in many others, it’s also often the biggest asset to divide.
Because of this and the emotional connection, many people fight to keep the house. That’s not always in your best financial interest, however. Houses cost money to maintain. You also have mortgages and taxes to account for.
This can be tough, especially if you try to cover everything with retirement savings or on your own for the first time. Depending on your circumstances, you may be better off taking other assets.
Another option is to sell the home and split the proceeds. It may be difficult to let go, but it may also be for the best.
These are just a few issues that couples face when divorcing later in life. As gray divorce rates continue to rise, a number of specific concerns also increase in prominence. Divorce is tricky in the best of times, but this particular segment of the population faces unique hurdles.
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