Imagine spending decades with someone, working, raising a family and accumulating assets that may include a vacation home, vehicles and several retirement investments. Now, imagine trying to untangle those assets.
Yet, many older couples are going down that road as gray divorces continue to trend upward.
Why are older couples divorcing?
While divorce overall has decreased during the last few decades, one demographic has seen an increase. The term “gray divorce” refers to couples in their 50s and 60s deciding to divorce after decades of marriage.
It’s true that 50 is the new 30 and 60 is the new 40. We are living longer, healthier lives and older adults are embracing the concept of a second act. Some couples are embarking on this new adventure together now that their children are grown and gone. Still, there are other couples finding that they no longer have anything in common. They’re not interested in staying in a marriage that isn’t satisfying and want to spend their remaining years rediscovering themselves.
However, older couples face unique financial challenges that are significantly different than their younger divorcing counterparts.
One of the biggest obstacles is the division of retirement savings. By the time couples reach their 50s and 60s, much of their wealth is invested in retirement accounts such as 401(k)s, IRAs, pensions and other long-term investments.
Michigan is an equitable distribution state, meaning marital assets are divided in a way considered fair, not necessarily 50/50. One spouse may have been the primary breadwinner, thus having a significant amount of money in a 401(k), while the other spouse took care of the home and children. The judge may issue a Qualified Domestic Relations Order (QDRO) to split the retirement fund to ensure one spouse doesn’t fall into poverty.
However, that leads to another issue regarding long-term financial stability. Older individuals have less time to recover financially after a divorce. With fewer working years left neither spouse will likely be able to rebuild their savings to pre-divorce levels. In addition, rather than two people supporting one household, they are now maintaining a household on one income.
Even though gray divorces may have several factors that complicate them financially, there are also solutions. It’s crucial to be well-prepared. You will need to seek help from someone who can help you make informed decisions that protect your financial future.