Divorce After 50?
NEW YORK ( MainStreet) About 62% of people divorced after 50 say their post-divorce savings and investments will no longer be adequate to fund their retirement due to limited earning power and less time to recoup their financial losses, according to Investors Group.
"Going through a divorce can be difficult at any age, but older couples face unique challenges in retirement planning as a result of later-in-life separations," said Christine Van Cauwenberghe, assistant vice president of tax and estate planning with Investors Group.
Among those challenges are re-organizing financially as a newly single person and making up for lost time.
"The older someone is when they divorce, the less time they have to recover financially," said Mark Baer, family law attorney and mediator. "The more money that the couple spends on their divorce, the less money they have available to them for retirement."
About 31% experienced the task of organizing finances after divorce or separation as overwhelming.
"Divorce is an emotional process that can cloud your ability to make sound financial decisions that will ultimately affect your future," said Van Cauwenberghe.
Part of that overwhelming nature stems from unexpected expenses.
"When a couple divorces, their combined expenses increase by an average of 30% because they are no longer sharing common expenses," Baer says. "The newly single needs to somehow address the unanticipated 30 percent combined increase in their expenses."
More than half say they have had to adjust their retirement plans and of this group, 55% say that their plans completely changed. Nearly 47% said the divorce forced them to scale back on their anticipated retirement lifestyle.
"After any life change it is crucial to reassess your current financial plan to ensure that it reflects your new direction in life," van Cauwenberghe said. "As you get closer to your retirement years there is a greater urgency to have a financial plan in place that helps you to achieve the lifestyle you envision whether it be together or apart."
A bitter divorce often increases the financial challenge. More 35% of respondents say they would classify their divorce as bitter. Of those who claim they had a bitter divorce, 54% cited financial difficulty from the cost of divorce proceedings.
"Unfortunately, people make emotional decisions and when it comes to divorce such decisions power the litigation train," said Baer. Strategies to survive divorce after 50 include:
- 1. Obtaining a reverse mortgage from the equity in a home. By doing so, a divorcee can continue living in his or her house and receive a fixed payment for life. "If someone does not have sufficient savings for retirement after divorce and they are in their fifties, they may have to leverage what they have," Baer told Mainstreet.
- 2. Purchase a fixed annuity with a minimum of $50,000. "It'll provide a fixed monthly payment for life, and if divorcees are concerned about inflation, they can pay for an inflationary adjustment to their annuity," said Baer. "I suggest an A-rated annuity company."
- 3. Relocate to another city, state or country where the cost of living is lower.
--Written by Juliette Fairley for MainStreet