Five Things You Should Know If You're Facing a "Gray Divorce"

Are you in your 50s or older and facing a divorce? You're not alone. A 2022 study from the Journal of Gerontology found that 36% of divorces were among people 50 and older. The impact is significant - an Allianz Life study revealed that 34% of married Americans who went through a divorce said it derailed their financial retirement strategy.

The emotional and financial impact of a "gray divorce" can be overwhelming. While hiring an experienced divorce attorney is crucial, understanding key financial and tax issues is equally important. Here are five essential things to know if you're facing a gray divorce:

1. How to Budget After Divorce

Your post-divorce income will likely be cut in half, but some expenses may exceed 50% of your married costs. Start by calculating a spending budget:

Itemize fixed costs (rent, car payments, insurance, groceries, utilities).
Adjust variable expenses (travel, restaurants, gifts) based on available income.
Revise your budget as your post-divorce lifestyle becomes clearer.

2. Selling Your Home

Keeping the family home might seem appealing, but consider:

The impact on your share of other assets.
Maintenance costs and mortgage payments.
Be aware of the possible tax implications of selling. A married couple currently has a $500,000 capital gains exclusion on the sale of their primary residence.
If the former home is sold, we often recommend renting for 6 months to a year before making a decision to purchase a new home.

3. Working After Divorce

For a non-working spouse, divorce often means returning to the work force.Things to consider include:

Consider returning to work or continuing your current job.
Explore part-time options.
Remember that working can help delay drawing from your investments.
Employer provided health insurance may be an important consideration.

4. Social Security Divorce Benefits

If you were married for at least 10 years:

Your Social Security benefit will be the greater of your own or half your ex-spouse's benefit.
Consider the timing of your divorce if you're close to the 10-year mark.
Evaluate the pros and cons of taking benefits early versus delaying for a higher monthly benefit.

5. Review Insurance Coverages

For a non-working spouse covered under their working spouse’s health insurance, divorce can mean a significant new expense. Be sure to explore cost of coverage prior to finalizing a divorce and factor that cost into the property settlement.
Also review any long-term care insurance coverage. If you have a “shared care” policy it will require special attention during divorce. Some shared care policies allow for a policy split into two individual policies or if that’s not an option the division of the pooled benefit can be addressed in the property settlement.

How Ark Royal Wealth Management Can Help If You Are Facing Divorce

Navigating a gray divorce can be challenging, but understanding these key areas can help you make informed decisions for your financial future. At Ark Royal, we work with numerous single women, many of whom are divorced. We're experienced in helping clients with this new chapter of their lives. Having a knowledgeable professional who can provide honest feedback on your financial situation, and who can be a sounding board as you navigate the complexities around divorce can be invaluable.