Divorcing Later in Life? Be Financially Prepared

Uncertainty. Unknowns.

Regardless of age, divorce creates questions and concerns about the future. Depending on the age of the couple, the focus of these concerns varies. Younger couples are generally more concerned with how they can maintain the lifestyle that their children have grown accustomed to now that there are two separate households. Children, rather than retirement, for example, becomes the focus.

It is not uncommon for couples who have been married for a longer duration to divorce. For couples in their 50s, 60s, 70s, and sometimes 80s, children are no longer the focus. Instead, the discussion is about two individuals and how they will live out the remainder of their lives with financial predictability and security.

For older couples, divorce brings to light many time-sensitive issues. Divorce can be a financial setback, especially for individuals who thought that “retirement was just down the road.” Unforeseen healthcare costs, decreases in the likelihood of remarriage, and/or an inability to increase earning power can be financially devastating to one’s financial picture, and the time to rebuild is more limited.

And so, how does one build a safety net to account for any decrease in income that may result from divorce?

For couples who are divorcing, it is important to be mindful of the following considerations and how they affect one’s financial stability:

  • Disability insurance;

  • Joint survivor annuities; and

  • Retirement plan benefits.

With an increase in age comes an elevated risk of medical issues or disabilities. Disability insurance suddenly becomes more important than life insurance. It is important to have options in order to maintain one’s standard of living in the event of a disability.

In a divorce settlement, it may be beneficial to negotiate retirement plan options that are available. Under a joint survivor annuity election, a former spouse is entitled to share retirement benefits. This type of annuity guarantees two lives. Without it, in the event of a former spouse’s health issues or death, the other spouse will lose their source of income from these benefits.

In addition, there may be instances when it is financially prudent to seek out a separate interest division of a retirement plan. This relates to traditional pension plans. As a separate interest, the status of employment of the former spouse does not impact the other’s ability to apply and collect these benefits in order to ensure an uninterrupted standard of living.

Individuals who divorce later in life often experience a shift in mindset with regards to finances. When considering retirement, an updated examination of one’s broad financial picture is needed.

What else is an important consideration to build a strong safety net later in life, after divorce? Please contact me today with your questions or comments.

Susan A. Moussi, CPA, CFP®, CDFA, CFT SMD Tax & Divorce Financial Planning Consultants, Inc.

Phone: 614.429.4172 susan@smdtaxanddivorce.com

This entry was posted in Alimony, Blog and tagged Disability, Disability Insurance, Divorce Settlement, Joint Survivor Annuity, Life Insurance, Medical Issues, Retirement Plan Options, SMD Tax & Divorce Planning Financial Consultants, Spouse, Susan Moussi by Susan Moussi.