Silver Divorce: Retirement Income Planning for Late Life Divorcees

The American College of Financial Services
March 15, 2017

Silver divorce – divorce among adults aged 50 and older – is booming. A study by the National Center for Family and Marriage Research at Bowling Green State University shows divorce rates for adults 50 and above have doubled since 1990.

Dissolving a marriage later in life creates many financial and retirement challenges. Assets that were once sufficient to support just one household must now stretch across two households. After the division of property, the assets in 401(k), IRA and other retirement accounts are often sliced in half, diminishing a significant piece of what may represent the lion’s share of lifetime savings for older couples

Proactive planning to create and maximize sustainable retirement income is imperative for all clients, but especially for those experiencing a silver divorce. Unlike younger divorcees who have a long career ahead of them and ample time to recover financially, older individuals have fewer working years left to save and invest. This leads to one of the most common worries among silver divorcees – the fear of outliving their savings.

While men and women may both suffer financially after silver divorce, divorce late in life is particularly harsh for women. Research shows women’s lower earnings over a lifetime and longer life expectancy make them vulnerable to poverty after divorce. Perhaps this is why women take more positive steps than men do to improve financial behavior after divorce. A survey by the American Institute of CPAs found women more likely than men to seek a job, increase retirement savings, improve spending habits and seek professional financial advice post-divorce.

Silver divorcees need your help planning their retirement income strategy and understanding what goals are still attainable despite potentially diminished assets. It can be a challenge to unravel the assets of a decades-long marriage. But before rolling up the proverbial shirt sleeves and analyzing your older clients’ retirement account assets, real estate, Social Security, pensions, and annuities, a prudent advisor will keep a few overarching considerations in mind.

Six Issues to Always Address When Working with Silver Divorcees

1) Assist with record collection before your client files for divorce.

It may be hard to obtain records after a divorce is initiated. Passwords for online accounts and paperwork can “disappear” when emotions run high. Tell your clients to collect documents verifying assets, debts, and other financial records before filing for divorce. Paperwork should be copied and stored in a secure place, such as with a close friend or in a safe deposit box. 

2) Advise your client to set aside funds for expenses and open personal credit cards before filing.

A silver divorce can take a long time to resolve, especially when older adults in long-term marriages with significant assets are involved – or not playing ‘fair.’ Assets may be frozen during divorce, limiting access to funds for living expenses or legal costs. Advise clients at risk of cash-flow problems to secure funds for expenses until final settlement is made. If the dependent spouse needs to use household income to qualify for a personal credit card, they should apply for credit prior to filing.

3) Provide record-gathering tools to lay the groundwork for discussion.

Silver divorcees may be overwhelmed by the administrative aspects of their finances and need your help organizing records, putting together documents, creating routine budgets, and determining what dreams and goals are still possible for their future. Help by giving them tools like online checklists for household inventories, budgeting spreadsheets, and estimating expenses.

4) Learn the legal and emotional aspects of silver divorce.

There are three parts to every divorce: an emotional divorce, a legal divorce, and a financial divorce. Whether your client was the partner who sought divorce or the one who didn’t want it, divorce is hard. Knowing the legal and emotional aspects of divorce helps you help your clients. It also improves communication by enabling deeper, more empathetic conversations, ultimately strengthening relationships and client retention.

5) Educate clients.

Many clients, particularly women, have been sidelined from financial decision-making in their households and face a steep learning curve. If clients show interest, direct them to study retirement planning information from reputable sources, like this reading list from Consumer Reports.

6) Review the settlement with your client before they finalize the divorce.

Discuss financial scenarios during legal negotiations and steer clients toward more favorable settlements that provide a strong base for retirement planning. It is difficult to modify the terms of the Marital Settlement Agreement (MSA) once the legal divorce is finalized, so make sure your client has the best deal available before they put their final signature on the decree.

Divorce at any age is a huge transition. Many people have difficulty making sound decisions in the heat of an emotionally charged situation. With your confident guidance and comprehensive expertise, silver divorcees can understand their options and navigate towards a more secure financial future.