Navigating Grey Divorce
Grey divorce is when divorce happens later in life (typically after 50). The rate of grey divorce has tripled since 1990 (1). As a result a lot of questions about Grey divorce come up. In todays blog we will chat about the 3most frequently asked:
- What are the Financial Implications of Grey divorce that I need to know?
- How does Grey Divorce Impact retirement plans?
- What are financial steps to take during a grey divorce to set myself up for the next chapter?
What are the financial implications of Grey divorce that I need to know?
While every divorce case is unique and different, the topics that come up most often include: division of assets, retirement funds and the realities of rebuilding finances later in life.
When it comes to dividing marital assets a lot of emotions can come up and it can get really complex fast (you can check out this blog post on how marital property gets divided in an equitable distribution state). When navigating this process towards equitable distribution you want to ensure that appropriate valuations are being used, taxes are being considered and you are making informed decisions with an eye towards life post-divorce.
Retirement accounts tend to be the 2nd biggest asset of couples when dividing assets (the house tends to be the biggest). When you are looking at things like a 401(K) or pension you can make calculations based on the length of your marriage and you may need a Qualified Domestic Relations Order (also referred to as a QDRO, you can see this blog post on the topic here). IRAs and Roth IRAs also need to be considered when dividing assets also need to be considered. Other assets that often come up are TSPs (a DRO is needed for division) are Military Pensions (a MPO is needed to divide one). Regardless it’s really important to know that division of retirement assets can affect retirement plans significantly- Most often clients work with me to model the financial implications of decisions during the division process.
It can be daunting to face the realities of rebuilding finances later in life, as it often means rebuilding savings and adjusting to a new cash flow situation. The challenges include managing reduced income, reallocating assets, and planning for unexpected expenses. It's especially crucial to reassess your financial goals and create a plan to get to your goal. Seeking advice from a financial advisor can provide personalized strategies to help you navigate this transition smoothly and confidently.
What are the financial implications of Grey divorce that I need to know?
Hard truth: Grey divorce does impact retirement plans.
When I chat with clients the two things that come up most often are gaining clarity around what your retirement plans are and understanding your social security benefits.
The first step to gaining clarity on your retirement plans post divorce is to take a comprehensive look at your new financial situation, including assets, income, and debts. You may want to think about your timeline to retirement and what makes sense for you. Often I work with clients to understand what a realistic and achievable plan is, or what is possible given the assets you already have.
Another piece of retirement that is often misunderstood is how divorce affects social security (here is a quick handout that talks about it). Be aware that if you were married for at least 10 years and are unmarried at the time of filing you are eligible for Spousal Benefits- Be aware that this does not affect your ex’s payout and they will not be notified of this when it happens. Consulting with a financial advisor can help you determine how social security benefits can impact your retirement plans.
What are financial steps to take during a Grey Divorce to set myself up for the next chapter?
Very often questions about how to prepare financially for life post-divorce come up. The best scenarios I see are for people who take the time to create plan, they know their numbers and they are consistently taking time to review their plan and numbers.
Often when gaining clarity on your retirement plan the plan itself begins to take shape (see 2 paragraphs above if you are not sure on how to do this). The next part is to know your numbers. By that I am referring to knowing how your assets are valued, what the tax implications are, what savings goals you need to be achieving to stay on track for your goal- or knowing a pivot needs to occur.
You should also plan on reviewing your plan and numbers. There are clients who review quarterly or biannually- once a year is as long as you should wait in between visits. Each time you review, consider if the plan you previously made still fits your current life. Also ask: How am I doing at achieving savings goals? By having a clear plan in place and knowing your numbers you can confidently navigate your new chapter working towards your goals.
We talked about financial implications of grey divorce, how retirement plans are affected and financial steps to take.
While this blog doesn’t address the emotional implications of Grey Divorce- it’s worth it to seek mental health support.
Remember, you don’t have to go through divorce alone: Reach out today to chat about your individual situation and options available to you.
Stay Informed. Stay Positive. Stay Confident.
Brianna Beski is a financial advisor and CDFA at Raymond James, based in Colorado. She focuses on helping people have confidence in their financial futures. For the rest of the story, visit her website or email her at brianna.beski@raymondjames.com.
1. BGSU research finds divorce among older adults has nearly tripled since 1990 . (n.d.). Bowling Green State University. https://www.bgsu.edu/news/2024/10/bgsu-research-finds-divorce-among-older-adults-has-nearly-tripled-since-1990.html
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Brianna Beski and not necessarily those of Raymond James. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors we are not qualified to render advice on tax or legal matters. Raymond James does not provide tax or legal advice. Please consult your own legal or tax professional for more detailed information on tax issues and advice as they relate to your specific situation.
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