The Hollywood tabloids are full of stories about celebrity divorce. In 2017 alone, Moviepilot.com has counted divorce announcements from actors Ben Stiller, David Schwimmer, Scarlett Johannson, Cuba Gooding, Jr., and even singer Janet Jackson, who recently made news for giving birth to her first child at age 50. Unfortunately, divorce is on the rise – and not just for the rich and famous.
According to a study by the Pew Research Center, divorce cases are increasing across the board, but Baby Boomers appear to be leading the way. The divorce rate among U.S. adults aged 50-plus has roughly doubled since the 1990s, and the divorce rate among those 65 and older has roughly tripled over the same period. At a time when many couples have raised their children, established their careers and are looking forward to a comfortable retirement, we’re now seeing an upsurge in so-called “gray” divorce. Why? Listland.com cites 10 reasons, including a loss of common interests, a loss of intimacy, problems with addiction, and more.
Even if you consider yourself happily married, it never hurts to be prepared. In fact, a 2017 study by the Association of International Certified Professional Accountants (AICPA) found that 75.6 percent of retirement age divorcees need a better understanding of how to manage their personal finances. When asked what steps would have better prepared their clients financially for divorce in retirement, CPA financial planners cited understanding how to manage personal finances, understanding the long-term financial planning consequences of a divorce settlement, and understanding the tax implications of a divorce settlement. In addition, they suggested having updated wills or trusts, increasing retirement savings, and decreasing spending. Just over a third of CPA financial planners recommended a pre-nuptial agreement.
But hindsight is 20/20, right? Most people who enter into marriage don’t anticipate the prospect of divorce, and some are completely surprised when it happens. For those who get divorced in their 50s or 60s, the time horizon for financial recovery is much shorter, because each partner may have fewer working years remaining. While it may be difficult to get back on your feet economically, you can take some positive steps right away:
- Ask for help. If you had a financial plan as a couple, it’s time to reassess how each of you will face retirement, potentially without a dual income or a partner. A financial planner who operates in your best interests can help you review your options and create a revised plan for retirement, including how to manage cash flow, taxes and debt obligations.
- Update important documents. You may have had a joint will or other joint accounts when you were married. Be sure to update your list of beneficiaries on insurance and retirement accounts (note: beneficiary designations supersede wills!), and change your power of attorney on estate documents and health directives. Failure to do so could lead to expensive legal fees for loved ones who have to make the change for you if you become incapacitated or die.
- Catch up on savings. If you are over 50 and participate in a 401(k) plan or an IRA, the government offers catch-up provisions for retirement contributions – in some cases, you may be able to put aside as much as $6,000 per year above the standard limit.
- Review Social Security claiming rules. The rules for claiming social security benefits on a former spouse’s earnings record are both nuanced and complicated. If your spouse has not yet claimed social security, you may find yourself in a difficult holding period during the first two years after divorce. A financial professional can help you examine all of your options.
At M.J. Smith & Associates, we often work with individuals who are getting back on track after a divorce. If you need assistance to manage a transition in your life, contact us to schedule a complimentary, no-obligation appointment. We’d be glad to help.
The forgoing information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.