There has been an overall decrease in the United States divorce rate since 1990, but the divorce over age 50 has doubled! “One out of three boomers will face old age unmarried” says the National Center for Family & Marriage Research at Bowling Green State University.
What are the main reasons for “The Gray Divorce Revolution”? 1. Lack of communication between spouses, 2. Financial hardships affecting a couple, 3. Empty nests and the lack of “stay together for the family” and 4. Lack of commitment to the marriage with less social stigma about splitting up and divorce.
In today’s economy, Baby Boomers are very vulnerable financially. In divorce assets are split leaving each spouse with less time and existing assets or funds necessary to recover from financial losses, existing debt and funds to secure retirement.
A very disturbing fact: the Employee Benefit Research Institute 2011 Retirement Confidence Survey states that more than half of all workers and their spouses have less than $25,000 in household savings and investments.
What are the main areas in which “The Gray Divorce” couples are looking at financial challenges in their new single state?
Retirement-Saving for retirement is not what it used to be. Most couples usually split up their retirement fund, but in a declining economy saved funds have been hard hit and there is insufficient money to retire in their current or accustomed lifestyle. Many divorced people are now postponing retirement by remaining in or trying to return to the workforce. It can be very difficult to re-enter the workforce with a much lower paying job as your only choice.
Social Security- If you are over 62, were married over 10 years to your former spouse and are currently unmarried and not entitled to receive a higher benefit based on your own work, you can receive benefits based on your ex’s earnings even if your former spouse has remarried.
The longer you can wait to collect divorced spousal benefits, preferably up to your full retirement age, the higher your benefits will be.
Make sure you obtain a copy of your spouse’s most recent Social Security statement when divorcing to have an idea what your benefits will be at retirement.
Housing- Breaking up the household and marital assets is usually the most emotionally draining part of any divorce. Who gets the house? A better question maybe who can afford the House? Many couples are very emotionally drawn to keeping their home even though it could be the difference between supporting a more streamlined lifestyle or a potential bankruptcy! Think with your brain and not your heart. You are starting a new phase in your life. What will make you secure and is truly affordable in your new financial situation?
Marital Debt- Debts incurred jointly in a marriage will remain the obligation of both parties after the divorce from the creditor’s position. If your former spouse is responsible for a debt but doesn’t pay it your credit can be severely damaged. If a debt was legally incurred exclusively by an individual spouse during a marriage in most cases it will be the responsibility of that individual. Make sure all joint credit cards are cancelled immediately and start building your own credit.
It is very important in “a gray divorce” that these debts are dealt with in a timely fashion since most spouses will soon be on a fixed income and may not be able to afford the financial stress of these liabilities.
Health Insurance- This is one of the most perplexing problems that ex-spouses face between the ages of 55-65 years old. If both spouses work and have separate health insurance policies there is not a problem. But if one spouse is self-employed or unemployed this could be a very big issue. COBRA insurance is usually available through your ex- spouse employer for 36 months after a divorce. This is usually a viable option but it is a more expensive option and you should move to an individual health insurance policy as soon as you are able.
“A Gray Divorce” is a very sobering experience for older Americans. Many will never be able to recuperate from the financial ramifications of the divorce. Don’t kid yourself. Your financial situation has definitely changed. Reevaluate your financial portfolio and start cutting your expenses!