Getting divorced can be one of the most challenging things you go through, but it may be especially hard if you are older and have been married for a long time. Divorce after 50, also called “gray divorce,” is not the same as a typical divorce; there may be several differences in the circumstances.
It’s a trend that accelerated as baby boomers set new standards for aging. Along with new standards for fitness and living and working longer, boomers set records for divorce. More people over 50 are getting divorced than ever. In fact, spouses over 50 today account for 25% of all divorces. Spouses aged 65 and older make up 1 in every 10 divorces. The gray divorce rate has roughly doubled since 1990.
What Is Gray Divorce?
Gray divorce, also referred to as silver divorce, points to the trend of increasing divorce rates in older adults and particularly couples who had long marriages.
People are living longer and want to be happier in their later years. Women are more financially independent, and some want to wait until their children are grown and leave the household.
The divorce statutes in Missouri are the same regarding your age. However, in a divorce between spouses over 50, financial and insurance issues tend to take on increased importance. For example, the division of marital assets needs to be viewed very differently when you are over 50. Keeping the marital home for the stability of the children is usually no longer important. Rather, the division of marital assets is more focused on retirement savings and liquidity to pay monthly expenses. The determination of spousal maintenance plays a much greater role for both spouses as one may need to reenter the workforce after being out of the workforce for many years and one may no longer be able to retire as early as previously planned prior to the divorce. A younger divorcing couple is more concerned about child custody and child support. An older divorcing couple is more concerned about health insurance, long-term care insurance, and Social Security benefits.
If you’re one of the many older adults facing divorce, consider these 4 important financial considerations.
- Assets and Expenses;
- A Financial Plan;
- Spousal Maintenance; and
- Social Security.
Assets and Expenses
When a court looks at dividing assets in a gray divorce, the two largest assets will likely be the house and retirement benefits, and possibly investments like stocks and bonds. Asset division will be simple in one respect – the lesser-earning spouse has a half interest in the marital portion of the retirement benefits accumulated by the greater-earning spouse, and if the marriage has been for at least ten years, the lesser-earning spouse can claim Social Security benefits through the income of the greater earning spouse after attaining the qualifying age. Similarly, the house will be divided equally if sold, or if retained by one spouse, an equalizing payment for the equity due the other spouse must be paid.
Statistically, women in gray divorce have less of a standard of living moving forward because they have lower income potential and often try to continue the standard of living during the marriage. To avoid these pitfalls, women in gray divorce should consider long-term consequences. It would make more sense to immediately downsize rather than keep the marital home – residential expenses erode annual income. Using a smaller budget at a modest level allows the woman in this scenario to avoid accessing retirement benefits too early. Further, if the woman has some type of job that will pay a decent income, the woman might want to forego maintenance or accept a lower amount in exchange for a higher share of the retirement benefits, knowing that it is unlikely she will earn a similar benefit from her work. The greater amount the woman can claim in the divorce, the greater nest egg she has for retirement, which could be only ten years or less from happening.
A Financial Plan
As spouses approach retirement, divorce hurts financially because of the singular reality of low-or-no-employment and the fixed income scenario.
As spouses near retirement, the odds that each will continue to work diminishes greatly, and if one has not worked in some time, the chance of any truly gainful employment is low. So, if these spouses decide to divorce, they are looking at a zero-sum game: no chance for growing new employment or reaping the rewards of future investments. The net worth of the couple will probably not get any higher, nor the earning capacity.
At the same time, the cost of living for post-retirement individuals expands, particularly as a share of gross income. The chance of illness creating a large healthcare debt increases while the chance of landing affordable long-term care insurance decreases. Medications can be costly, and private insurance to cover what Medicare will not is yet another expense.
Given these realities, when spouses at this age do decide to divorce, they really suffer financially because two people living together in one household can do much more on the same funds than two people in two separate households. As a result, both spouses see a decrease in their standard of living because they are taking the net worth, splitting it, and using it to sustain two separate lives. It is as if you just took your annual income and cut it in half. And the lesser-earning spouse, i.e. the one with fewer benefits or prospects, cannot hope for spousal support from the other spouse if that spouse suffers from the same constraints.
So, what should people of a certain age do about divorce?
Plan in advance. Once a couple reaches age fifty, they should sit down with a financial planner and examine how to structure funds to maximize their individual security in the event of a divorce – including maintaining health, life, and disability policies.
In Missouri, spousal support (i.e., maintenance) is not guaranteed in any divorce unless you and your spouse signed a prenuptial or postnuptial agreement that sets forth the terms for that to occur. Otherwise, under Missouri law, a court may grant maintenance only if it determines that a spouse lacks sufficient property, including property awarded during the divorce, to provide for his or her reasonable needs; and is unable to support himself or herself through appropriate employment or is the custodian of a child that makes employment outside the home unreasonable. Thus, for a court to even consider awarding maintenance, it must first find a spouse really cannot meet his or her reasonable needs through his or her own efforts.
The Missouri spousal maintenance statute gives the court specific direction to arrive at a reasonable sum for maintenance. In general, the longer the marriage, the more likely the court will award some maintenance, particularly if the requesting spouse spent most of the marriage caring for the children. The court will look at the monthly budget of expenses of the requesting spouse, determine what is truly reasonable, and find the gap between expenses and reasonable income. The gap will be the sum for maintenance, subject to the ability of the other spouse to afford it.
If a court finds that your spouse really cannot meet his or her reasonable needs through his or her own efforts, then you could be ordered to pay spousal support. This is fact dependent on the division of retirement savings in your divorce and whether it or other property was used to address your spouse’s financial needs. The ability to divide retirement can also affect the court’s determination to order spousal maintenance. For example, if you are receiving VA benefits instead of military retired pay that could normally be divided or receive a monthly payment from the Public School Retirement System (PSRS) that is considered separate property by law, and your spouse has no retirement and was not working outside of the marital home, then spousal support may be awarded by the court even though you are retired.
If you were a stay-at-home parent or had little or no work history during the marriage, then you may not qualify for Social Security benefits under your work history. If that is you, then you should determine if you could qualify for partial benefits under your former spouse’s work history. This should be investigated during the divorce process but can be done even after your divorce. Your benefits eligibility will depend on several factors including your birth year, the age at which you start claiming benefits, the length of your marriage, etc. Your monthly Social Security benefit can be an important consideration in your divorce settlement and should not be ignored when divorcing over the age of 50.
Should you need the assistance of an experienced divorce over 50 attorney in Creve Coeur and O’Fallon or have questions about your divorce situation, know that we are here to help and ready to discuss those questions with you.