Divorce at any age is rough. But if you’re getting divorced over 50 (which is also known as a “gray divorce”) there are some issues that can arise that don’t happen with divorce at a younger age.
Here are 7 things you can’t ignore and MUST Understand when getting divorced over 50:
1. Cash Flow.
Surviving a divorce after 50 requires more than just getting a good divorce settlement. You also need to make sure that you bring in enough money every month to pay your bills. In other words, you need positive cash flow.
How do you figure out if you’re going to have positive post-divorce cash flow? It starts by making a detailed monthly post-divorce budget BEFORE your divorce is final!
If you can see from your budget that you are not going to have enough money after your divorce to pay your bills you have three choices: make more, spend less or live off your assets.
Making more may mean that you need to get a job. (Yes. That’s frightening!) Spending less may mean seriously downsizing your lifestyle. And living off your assets only lasts for so long.
Once you spend down your assets, they’re gone. So, unless you can afford to live off your assets without risking that you will run out of money before you die, burning through your assets at warp speed after your divorce is a really bad idea.
While everyone understands that divorce affects minor children, many people assume that a divorce later in life won’t affect their adult children.
It doesn’t matter how old your kids are. Your divorce will change their family forever. It will affect their relationships with you and your spouse. It may also affect their finances moving forward.
If your divorce leaves you (or your spouse) penniless who do you think will keep you from living on the streets? Your kids!
If your kids have to support you, your divorce will affect their finances. (Think about that when you’re negotiating your divorce settlement!)
Your divorce will also affect your kids emotionally. Adult children of divorce often have problems dealing with the demise of their parents’ marriage. It rocks their sense of security. It undermines their faith in marriage as an institution. It also shakes their own relationships to the core.
The bottom line is that you probably can’t shield your kids from all of the effects of your divorce. But if you pay attention, you may be able to at least soften the blow in significant ways.
The amount of taxes you have to pay on the assets you get in a divorce can dramatically affect your bottom line. If you don’t understand that, then you may be surprised at what’s left after you pay Uncle Sam.
What’s more, if you were expecting to live off of your assets after you divorced, then the amount of money you actually get after taxes matters a lot!
While explaining all of the tax ramifications of divorce would take volumes, there are a few basics you absolutely need to know. For example, you need to know the difference between pre-tax assets and post-tax assets.
Pre-tax assets are those assets that you HAVE NOT paid taxes on. Post tax assets are those assets that you HAVE paid taxes on. A Roth IRA is a post-tax asset. A regular IRA is a pre-tax asset.
Getting $100,000 from a regular IRA will not put $100,000 in your pocket. It will put $100,000 minus income taxes in your pocket. Getting $100,000 from a Roth IRA, on the other hand, will give you $100,000.
If you don’t pay attention to how taxes will affect your divorce settlement, you may find yourself in a huge financial bind after your divorce.
4. Spousal Support a/k/a Maintenance a/k/a Alimony.
Spousal support can play a huge role in many later-in-life divorces.
In Illinois, divorcing spouses who have been married for 20+ years can get maintenance for the same number of years they were married for, or for an indefinite period of time. When you’ve been married for decades, that’s a significant amount of time!
Paying maintenance for that long can be a sizable obstacle in divorce negotiations. So can securing those payments.
When someone is going to have to pay spousal support after divorce s/he also has to make sure that there is enough money to keep making those payments even after s/he dies. Most people do that by buying a life insurance policy on the paying spouse’s life.
But getting a life insurance policy after 50 (or 60!) can be tricky.
If the spouse paying maintenance has a serious health condition, s/he may not be able to buy life insurance at all. Or, buying the insurance may cost a small fortune! Because of that, securing maintenance is often a much bigger challenge for older couples than it is for younger ones.
5. Health Care.
The older you get, the more important health insurance and health care in general, becomes. Unfortunately, the older you get the more expensive it is to buy that health insurance!
Unless you are 65 and are covered by Medicare, you need to find some kind of health insurance after divorce that fits into your budget. (Even if you are covered by Medicare, you may need supplemental health insurance as well.)
The mistake many people wait is that they don’t investigate their health insurance options until their divorce is either done or almost done. By that point, their divorce is settled or mostly settled. (Or, at least, that’s what they think!)
When they find out that their health insurance premiums are going to cost more than their mortgage, they suddenly have to re-think their entire divorce settlement! Doing that can completely destroy your settlement, and turn your divorce into an ugly mess.
That’s why it’s so important if you’re divorcing later in life that you work with a good health insurance broker as soon as possible. That broker can help you find and understand your options …and keep you from tearing your hair out in frustration!
Getting a divorce after 50 can throw a giant monkey wrench into your retirement plans. Even if you scrimped and scraped so that you had enough money to retire at 60, getting a divorce can change everything.
In the best case, you will only lose half of your retirement accounts. In the worst case, you could lose more.
So the first thing you have to realize if you’re getting a divorce later in life is that you might not be able to retire as soon as you thought you would. Or, you may not be able to retire at all. (Yes. Ouch!)
In order to figure out your retirement options, it helps to work with a GOOD divorce financial planner. S/he can run projections showing you how long your retirement money is likely to last. S/he can also tell you how long you have to work before you can start drawing on your retirement money.
Finally, as with health insurance, it’s important to get complete financial information BEFORE you finalize your divorce. That way you can adjust your negotiations based upon a realistic picture of your financial future.
7. Big Expenses (a/k/a Money Suckers).
If you are going to have to live on a budget after your divorce, you need to eliminate as many large, unexpected expenses as you can before your divorce is final.
Sadly, the two things that cause the most large, unexpected expenses tend to be two things people love very much: their house and their adult children. While you can continue to love both after your divorce, you may not be able to continue to support either.
Although most people think of their house as an investment, it is also a liability. Not only do you have to pay the mortgage, taxes, and insurance, but you also have to pay for maintenance and repairs. All of that can send your budget into a tailspin.
As much as you may love your house, selling it before you’re divorced can may make a lot of financial sense. That way you and your spouse will share any last minute repair costs as well as the closing costs.
Similarly, your post-divorce budget may not have room in it to support your adult kids. Even if you’ve been supporting them for decades, your divorce may force them to finally have to stand on their own to feet.
That’s not necessarily a bad thing. Although, it is likely to be painful in the short term.
Surviving a Gray Divorce
Surviving a gray divorce is in many ways more challenging than surviving a divorce at any other stage of life. You usually have to deal with more complicated financial issues. You often have to deal with trickier health care issues. Plus, your kids can still be a problem.
If a gray divorce may be in your future (or in the future of someone you love), know that educating yourself about the divorce process, and getting the help you need, will be even more important for you than it will be for younger people.
Simply put: You can’t afford to make mistakes.
Karen Covy is a divorce attorney, advisor, mediator and coach who is committed to helping couples resolve their disputes as amicably as possible. She is also the author of When Happily Ever After Ends: How to Survive Your Divorce Emotionally, Financially, and Legally. Karen has been featured on the Channel 7 News, WCIU You and Me This Morning, WGN Radio, MarketWatch, The Goodmen Project, and numerous other radio shows, publications, and podcasts. You can find her articles on The Huffington Post, Divorced Moms, Divorce Force, GUYVORCE, and Your Tango, as well as on her own website at karencovy.com. This article was originally published on Karen’s blog.