Why divorcing after retirement is costly

You and your spouse worked hard for decades, at one career or multiple, and diligently saved and invested toward that day you could finally retire. You had grand plans together to travel or move to a place in the country and everything was rosy. Until it wasn’t. Problems developed in your relationship to the point of an irreconcilable outcome and divorce was the next step.

Divorce is an unfortunate byproduct of failed marriages and exponentially so if the parting happens after one or both spouses retire. Even for Michigan couples that stay together or single people, retirement typically means the end of steady income from a long-term job and quality of life from here on out depends on investments, existing assets, and possibly a part-time job.

Divorce can derail the whole works and in fact lead to financial disaster. More older couples than ever are entering a ‘gray divorce’ stage—roughly double for those aged 50 and up, and triple in the 65 and older bracket since 1990. For the great majority of these couples, divorcing after retirement has a significant impact on best-laid financial plans. Those 401(k) funds and any other investment accounts likely have to be divided and doing so fairly can be a contentious process involving expensive but invaluable legal assistance in untangling an often complex web of savings and investments.

Time is running out

Even the most amicable and fair divorces are stressful and complicated but divorce after retirement also carries an element of time, or lack of it. Older adults only have so many years left and it is critical to fully understand expenses and investment details in order to balance ability to spend with available funds.

Is keeping the house a good thing?

Making matters worse is the concerning fact that women are typically affected much worse financially than men—some reports reveal a nearly 50 percent dip in standard of living after a divorce. Why the disparity? In Michigan and throughout the country, a common agreement is the man receives most or all of the retirement account and the woman keeps the house. Sounds great on the surface but maintenance and property taxes are no picnic and the home doesn’t generate an income.

Insurance woes

Another blow in gray divorce comes from health insurance expenses. Many couples share health coverage offered by one or the other’s employer. A divorce situation typically takes that coverage out of the picture; if the other spouse is not working or relied on their partner’s coverage, they are left without insurance and faced with a very high monthly bill to obtain a new plan.

Gray divorce solutions

There is no one magic wand solution in managing divorce after retirement; however, it is very important to fully understand the life change and enormous financial complexity headed your way. It can be a harsh reality that you now must live within your means, which can be drastically different than when you were married with dual incomes. Plan ahead to avert disaster and partner with an expert legal team to ensure a comfortable future.