As life expectancies increase, divorce is becoming a more appealing option for people over 50 years old who realize they are no longer happy in their marriages. Although gray divorce, a term for divorce involving spouses over 50 years old, is becoming more common, it can involve devastating financial consequences. Every person going through divorce should plan for the potential impact divorce could have on his or her financial situation. However, if you are at least 50 years old, you may have greater financial considerations during divorce than those under 50 years old have.
Following a gray divorce, both former spouses can feel a financial pinch as they begin paying for separate living situations with sometimes half the income they are used to having. On top of that, the couple’s assets are split in divorce, including retirement funds, and those over 50 have less time that younger people have to build retirement funds back up.
Understand your financial situation
One way to avoid some financial pitfalls is by taking the time to understand your family’s current financial situation and trying to anticipate what your personal financial situation might be after divorce. By understanding the assets and debts your family has prior to divorce, you can help ensure marital property is fairly divided in your divorce. By calculating the expenses you expect to have after divorce, you can begin planning how you might pay for those expenses.
The lower-wage-earning spouse may be awarded alimony to help cover some of the additional costs caused by the divorce. However, alimony is not awarded in every divorce. An alimony award usually depends on each spouse’s income, the duration of the marriage and each spouse’s contribution to the marriage.
Prioritize long-term financial security
During your divorce, be careful as you choose which marital assets you want to keep. Some assets, like the marital house, are illiquid and may come with unanticipated expenses, like maintenance. Additionally, try to avoid the temptation to use retirement savings to pay current expenses.
Throughout your divorce it is often best to prioritize long-term financial security, which often means preserving as much of your retirement funds as possible. If your retirement funds take a significant hit in your divorce, it may be prudent to adjust your lifestyle after divorce to rebuild your funds as quickly as possible.
If you think divorce may be in your future, it is important to consider the financial effects divorce cause for you. The financial consequences for divorce may not be an appropriate reason to stay in your marriage, but your situation may require careful planning to avoid some of the most detrimental financial consequences that can accompany gray divorce.