Are you over the age of 50 and recently divorced? Or, are you considering a divorce? You’re not alone. Researchers at Bowling Green State University recently found divorce rates for couples over age 50 have more than doubled since 1990, and that’s while divorce rates have fallen for nearly every other age group.1 In fact, divorce rates among those over 50 have increased so much that researchers have coined a new term for the trend - “Gray Divorce.”
Why have divorce rates increased among this particular age group? There could be any number of reasons. Women may have more financial flexibility than past generations of women had, and thus more financial flexibility and confidence to live independently. With longer life expectancies and probability of living well into one’s 80s or 90s, some people may not find it feasible to stick it out in an unhappy marriage. And, some may simply want to pursue new paths in life.
Whatever the reason, it’s a nearly universal truth that divorce brings an added set of financial pressures and complexities. That’s especially true when the couple in question is nearing retirement. There are usually significant retirement assets to split, along with pensions, Social Security benefits and possibly even real estate.
If you’ve recently gone through divorce or are planning to in the near future, it’s important you consider how the divorce may impact your retirement plans. Fortunately, if you take action and plan carefully, you may be able to avoid some financial missteps. Below are three tips to help you stay on solid financial ground with regard to your retirement:
1. Develop (and stick to) a budget.
Perhaps you and your spouse lived comfortably while married and rarely used a budget. Now may be a good time to change that habit. Post-divorce, you might find yourself with less income and increased financial obligations.
For instance, you may be responsible for spousal support or possibly even child support. Or, you may find yourself back in the workforce for the first time in years, and possibly earning a modest level of income.
You also may find yourself with a deficit when it comes to retirement savings. In many divorces, retirement assets get split in two. However, a pool of retirement assets that were meant to support one household may be strained if they’re used to support two households.
With retirement right around the corner, you will likely need to save as much as possible. By creating a budget and sticking to it, you can monitor your spending and make sure you are contributing as much as possible to your retirement accounts.
2. Figure out your health care coverage.
Healthcare is no small expense in retirement. In fact, Fidelity found the average 65-year-old couple retiring today could expect to spend $245,000 in retirement on premiums, deductibles, co-pays and other medical expenses.2 That number doesn’t include the cost of long-term care and nursing home stays.
Make sure you have a plan for healthcare coverage in retirement. If you are planning to divorce and are reliant on your spouse’s healthcare coverage, you may want to factor this into your settlement negotiations.
Also, consider a long-term care insurance policy to address significant health care needs later in life. A long-term care policy can fund nursing home stays, in-home treatment and even home modifications for things like lifts and wheelchairs. Without coverage, you may be forced to pay out-of-pocket, which could limit the quality of care you receive.
3. Understand your Social Security options.
Some newly-single retirees worry their Social Security benefits will be minimal because they have limited work history. That’s especially true if they stayed home to raise children while the other spouse worked.
Fortunately, Social Security allows divorced spouses to claim a benefit based on the former spouse’s earning history. There are some criteria you must meet, however. The marriage must have lasted at least 10 years. You must be unmarried. You must be at least 62 years old. And, your spousal benefit must be greater than your individual benefit. If you meet that criteria, you may be well-served by filing for a benefit based on your former spouse’s benefit.3
You may benefit from having an experienced and knowledgeable financial professional by your side. Contact us at Gallagher Financial Group. We welcome the opportunity to help you align your goals with the right products so you can enjoy a comfortable and fulfilling retirement.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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