A New Chapter: Navigating Financial Considerations After Divorce in Your 50s

Life after 50 can be a beautiful journey characterized by wisdom and deeper self-understanding. It’s a period marked by maturity and, often, financial stability. However, divorce can upset this stability unexpectedly and prompt numerous financial and emotional changes. 

Divorce after 50, frequently termed “gray divorce,” represents an emotional ending and poses unique financial challenges. While this transition may seem daunting, a strategic approach can aid in navigating the economic implications and guide you toward financial wellness.

This blog will shed light on five important financial considerations when divorcing after 50, emphasizing the importance of post-divorce financial planning. We’ll also introduce you to Triad Financial Advisors in Greensboro, NC, who can help you navigate this new path. Because even in the face of adversity, there’s always an opportunity for a fresh financial start.

  • Retirement Savings and Pensions
  • Spousal Support
  • Healthcare Costs
  • Housing and Living Expenses
  • Estate Planning 

Retirement Savings and Pensions: 

A major financial consideration for people over 50 going through a divorce is how to divide pension benefits and/or other types of retirement savings. Depending on the laws of your jurisdiction and the specifics of your situation, you may need to divide these assets with your former spouse. This can significantly impact your retirement plans, so seeking advice from an experienced financial advisor familiar with these divorce-related matters is important.

When dealing with retirement savings, typically 401(k)s, IRAs, or other types of employer-sponsored plans, the key principle is that funds accumulated during the marriage are considered joint marital property and are, therefore, subject to division upon divorce. 

This division is usually executed via a Qualified Domestic Relations Order (QDRO), a legal document issued by the court that gives a spouse or former spouse the right to a portion of the benefits of the participant’s retirement plan. However, how the funds will be divided can depend on numerous factors, such as the duration of the marriage, the contributions made to the plan during the marriage, and other related actions.

Employer pension plans, another form of retirement income, can also be subject to division during a divorce. The process can be more complex than retirement savings due to the structure of these pension plans. 

The future benefits of a pension plan are generally calculated based on factors like the employee’s years of service and salary history. Similar to retirement savings, a QDRO is used to divide pension benefits. 

How TFA Can Help: It’s crucial to remember that the division of retirement assets can have significant tax and financial implications. The TFA team can provide professional advice to help you avoid potential pitfalls. 

Spousal Support

Spousal support, often referred to as alimony, is a legal obligation that can be placed on a person to provide financial aid to their spouse during or after a divorce. The key aim of spousal support is to limit any unfair economic consequences of a divorce, ensuring that both spouses can maintain a similar standard of living to that which they enjoyed during the marriage. 

Factors such as the length of the marriage, the financial and non-financial contributions of each party, each spouse’s future earning capacity, and the standard of living established during the marriage all play critical roles in determining the amount and duration of spousal support payments. It’s important to note that spousal support is not a guaranteed entitlement, and it is determined on a case-by-case basis depending on the specific circumstances surrounding the divorce.

In “gray divorce,” where individuals over 50 decide to end their marriage, the implications of spousal support are even more profound. Given that one spouse may have been out of the workforce for a while or may face age-related barriers to employment, the financial stability provided by spousal support can be crucial. In such instances, courts often consider the receiving spouse’s age, health status, and employability when determining the duration and amount of support. 

This approach ensures that the receiving spouse is not unfairly disadvantaged due to the divorce, especially when their capacity to become financially independent is significantly limited.

How TFA Can Help: We’re experienced in helping divorced women over 50 rebuild their financial journeys. This starts with our Life With Intention® financial planning process that includes a financial plan designed to fund and facilitate your financial needs. 

Healthcare Costs 

Navigating the health insurance landscape following a divorce can be complex and potentially costly, especially if you’ve previously relied on your spouse’s health insurance. This challenge is more pronounced for people over 50 as they are statistically more likely to experience health issues that require more frequent medical attention or medications. 

Many factors, including your age and your health status, your income, and the extent of coverage needed, influence the cost of healthcare coverage. These factors can significantly increase healthcare costs post-divorce, adding financial strain during a prolonged illness.

However, various healthcare coverage options exist to help you secure insurance post-divorce. Private insurance is one such option, where individuals purchase insurance from private insurance companies. The coverage and costs are variable, often tailored to individual health needs and financial capabilities. 

Another option is COBRA, the Consolidated Omnibus Budget Reconciliation Act, a federal law that allows individuals to temporarily keep their health coverage after a life-changing event like divorce. While COBRA can provide continuity of care, it often comes with higher premiums. 

Lastly, government programs like Medicare and Medicaid can provide coverage. Medicare is primarily for individuals aged 65 and above, while Medicaid is based on income levels. These programs can help mitigate healthcare coverage costs but may come with their own eligibility criteria and coverage limits.

How TFA Can Help: Our team of financial professionals can help you develop a budget that includes current and future healthcare costs so you are aware of these expenses as you plan your income needs moving forward.

Housing and Living Expenses

Another crucial factor to consider is your new cost of living expenses. These can include utilities, groceries, healthcare, transportation, and more. Budgeting for these costs and being prepared for unexpected expenses is essential. If your financial situation has significantly changed, you may need to adjust your lifestyle to match your new budget. This could mean making changes such as cooking at home more often or cutting back on entertainment costs.

When we discuss living expenses, it’s also essential to consider the costs associated with children, if applicable. Child-related expenses include education, childcare, health insurance, extracurricular activities, and other costs. As part of a divorce settlement, these expenses are often divided between the parents, but this doesn’t negate the fact that they can represent a significant financial burden. Ensuring a clear understanding and agreement on sharing child-related expenses is paramount in the post-divorce financial planning.

If you are used to a dual-income household, you may need to adjust to living on a single income after divorce. You may need to sell your family home and downsize, or you may need to find a way to refinance a mortgage on a single income. Considering these issues in advance can help reduce stress and financial insecurity after the divorce.

How TFA Can Help: Our Intentional Planning System creates a financial plan around your life’s most significant aspects.

Estate Planning

Estate planning is a process that involves deciding how your assets will be distributed upon your demise. It can be an essential way of ensuring your wealth and assets go exactly where you want them to go, potentially saving your loved ones a significant amount of time and taxes. 

Aside from the distribution of assets, estate planning can also involve specifying your wishes regarding healthcare should you become incapable of making your own decisions. This can be done through tools such as a living will, a health care proxy, or a power of attorney, which should be regularly reviewed and updated, particularly following significant life changes.

Post-divorce, these life-altering changes necessitate an immediate review and update of your estate plan. Assets and financial situations may have changed drastically due to the divorce, and previous arrangements may no longer be applicable or desirable. 

For instance, your former spouse may be the primary beneficiary in your will or on insurance policies, and your power of attorney may still be in that beneficiary’s name. Ensuring these are updated to reflect your new circumstances is critical to controlling your estate. 

How TFA Can Help: Divorce can also have substantial tax implications, affecting the value of your estate and how much your beneficiaries receive. Consulting with our Greensboro financial advisors can help navigate these complexities to revise your estate plan effectively.

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More about the author: John Marske

JOHN MARSKE, CFP® is a Lead Advisor at TFA. He spearheads client relationships by helping people envision and act on their retirement goals.

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