The decision to end a marriage, especially after many decades, brings profound personal and emotional shifts. This period, often called “gray divorce,” involves couples over 50 choosing to separate.
While the emotional aspects are significant, understanding the financial changes ahead is just as crucial. For older adults, divorce impacts retirement plans, healthcare and savings in distinct ways. This guide helps you understand how to protect your financial standing as you enter a new chapter.
Becoming more common
Data shows a significant increase in divorce rates for individuals aged 50 and older. The Pew Research Center reported that the divorce rate for people 50 and older doubled between 1990 and 2017. For those 65 and older, it tripled.
This trend carries unique financial weight. Couples approaching or in retirement must carefully consider how a divorce reshapes their economic future.
Dividing retirement assets
Your retirement savings represent years of hard work and planning. When a marriage ends, these assets often become a point of careful discussion. Pensions, 401(k)s, and IRAs are typically divided equitably between spouses.
To divide employer-sponsored retirement plans such as 401(k)s or pensions, a special court order is necessary. This order is called a Qualified Domestic Relations Order (QDRO). A QDRO allows a portion of one spouse’s retirement plan to be paid to the other spouse without immediate tax penalties. It ensures the correct distribution of these significant funds.
Social Security benefits and your future
Social Security benefits are a cornerstone of many retirees’ income. Divorce can affect your eligibility for spousal benefits. You may collect benefits based on your ex-spouse’s earnings record.
To do this, your marriage must have lasted at least 10 years. You must also be at least 62 years old, and you cannot be remarried. Your ex-spouse must also be eligible for their own Social Security benefits.
Healthcare coverage after divorce
Healthcare costs are a major concern for older adults. After a divorce, you usually lose coverage under your ex-spouse’s health insurance plan. This requires immediate attention.
You might be eligible for COBRA benefits, which let you continue your ex-spouse’s group health coverage for a limited time. However, COBRA can be expensive.
If you are 65 or older, you may qualify for Medicare. If not, you will need to seek individual health insurance through the marketplace.
Adjusting your estate plan
Divorce demands a complete review of your estate plan. Your current will and trusts likely name your spouse as a primary beneficiary or executor. These documents require immediate revision.
In New Jersey, divorce automatically revokes certain provisions benefiting an ex-spouse in a will or trust. However, it is still best to create new documents that reflect your new wishes.
You must also update beneficiary designations for life insurance policies, retirement accounts and other assets. Doing this ensures your assets go to your intended heirs.
Seeking legal counsel
Gray divorce affects your financial security in ways that require professional guidance. The division of assets accumulated over decades, combined with limited time to rebuild wealth, makes every decision critical to your long-term financial health. An experienced family law attorney can help you safeguard the financial security you have worked decades to build.