When couples over the age of 50 separate or divorce, it’s commonly called a “grey divorce.” This trend is increasing rapidly, and it comes with unique financial challenges, especially for women.
Divorce at any age can be difficult. But when you’re close to retirement or already retired, the stakes become much higher. Retirement planning is essential for ensuring you enjoy your financial freedom and security.
At LifeCoach.com, we regularly help women navigate significant life transitions. I’ve learned first-hand how critical proper financial preparation is during grey divorce—there is much more to consider than you may realize. If you’re considering a separation later in life, understanding the financial risks of grey divorce can help you protect yourself. You can safeguard your retirement, and build a secure, fulfilling future.
Why Grey Divorce is Riskier for Women
Grey divorce tends to be financially riskier for women compared to men for several reasons:
1. Lower lifetime earnings: Women often earn less over their careers. This can be due to wage gaps, taking time off for caregiving, raising children, and taking part-time employment.
2. Smaller retirement savings: Lower earnings typically result in smaller retirement savings. This leaves women more financially vulnerable post-divorce.
3. Longer life expectancy: Statistically, women live longer than men, meaning their retirement savings must stretch further. An actuary would be able to compute the difference you’d need to account for a longer life expectancy.
4. Women often continue raising the children: Women who have been the primary caregivers often continue in this role. This hampers their ability to take on full-time work and adding to their ongoing expenses.
5. Women don’t remarry as often as men: After a grey divorce, men are statistically more likely to re-partner than women. Research indicates that within ten years of a grey divorce, approximately 37% of men form new partnerships, compared to about 22% of women. This trend is also evident in remarriage rates; in 2013, 64% of men whose first marriage ended in divorce or widowhood had remarried, whereas only 52% of women in similar circumstances had done so.
Several factors contribute to this disparity:
Social dynamics: Men often have social networks that encourage re-partnering, while women may prioritize independence or face societal expectations to remain single.
Partner availability: Men may seek younger partners, expanding their potential dating pool, whereas women of similar age may find fewer available partners.
Economic considerations: Men might pursue remarriage for companionship and support, while women may be cautious due to financial independence or concerns about caregiving responsibilities.
Understanding these trends can help you navigate post-divorce relationships with informed expectations.
Financial Risks Women Need to Consider
Here are several significant financial risks women need to carefully consider:
Difficulty re-entering the workforce: Women who have taken significant time away from their careers to raise children often face substantial barriers upon returning to work. This gap in employment can severely limit earning potential. For instance, a woman who paused her career for 15 years to raise children may find employers hesitant to hire her, believing her skills have become outdated.
Stale professional networks: A lack of recent professional experience can mean outdated skills and diminished professional networks, making it harder to find well-paying employment quickly. Former colleagues may have moved on, and it can feel intimidating to rebuild connections after decades away from the professional scene.
Retraining costs: Updating skills or gaining new credentials can be expensive and time-consuming. Many women underestimate the time and financial resources required to become competitive in the job market again. Enrolling in courses or certifications often means juggling responsibilities at home while investing heavily in education.
Ageism in employment: Women over 50, and particularly over 60, frequently encounter age discrimination in hiring practices. Research by AARP indicates that ageism starts impacting job seekers around age 50, with many women noticing fewer callbacks and fewer opportunities for advancement or job offers compared to younger candidates.
Physical health limitations: Aging brings physical health challenges, potentially limiting the type and amount of work a woman can perform comfortably and sustainably. For example, roles involving prolonged standing or heavy physical labor may no longer be practical for women experiencing joint pain or other age-related health issues.
Protecting Your Assets in Grey Divorce
Here are some actionable steps to protect yourself financially during a grey divorce:
1. Assess your financial situation clearly: Understanding exactly where you stand financially is the first step. List all assets, liabilities, income sources, and monthly expenses. Don’t overlook pension plans, social security benefits, investments, properties, and debt.
2. Work with a financial advisor specializing in grey divorce: This isn’t just a standard divorce situation—it’s retirement planning. Consulting with a financial professional experienced in grey divorce can help you see the bigger picture and strategize effectively. Consider seeking guidance tailored specifically to women’s unique financial needs. My fee-only, financial advisor, Sheila Walker Hartwell of Hartwell Planning focuses mainly on women and widows.
3. Focus on securing retirement assets: In grey divorce, retirement funds like 401(k)s, pensions, and IRAs often become the largest portion of divisible assets. Negotiating carefully to secure your fair share is crucial for long-term financial security. Remember, retirement accounts are not all created equal—tax implications matter, so consult your financial advisor carefully.
4. Be mindful of housing decisions: Keeping the family home may feel comforting initially, but it might also drain your resources in the long run due to upkeep costs and taxes. Consider downsizing or choosing housing options that maximize your cash flow and contribute positively to your retirement planning. Remember to include the costs of moving to a new home in your divorce settlement, including any taxes that might be owed on the sale of your home and other fees.
Grey Divorce Financial Tips: Securing Your Future
1. Create a budget focused on your future: Post-divorce, adjust your spending and saving strategies to fit your new financial reality. A well-planned budget will empower you to maintain independence and enjoy your new life without worrying about how you’ll pay the bills.
2. Understand Social Security and pension benefits: You may be entitled to a portion of your spouse’s Social Security or pension benefits. If you’ve been married 10 years, you are entitled to your spouse’s Social Security benefit even when divorced. Research these options carefully as they can significantly impact your retirement planning and seek professional and legal advice.
3. Invest wisely and conservatively: With less time to recover from financial setbacks, conservative, low-risk investments become crucial. Prioritize stability over speculative growth. If you are retiring soon, keep in mind the dangers of sequence of returns risk and make sure to plan accordingly as the first five years of retirement can have the biggest impact on your future financial security and lifetime spending.
4. Boost your retirement savings: If you’re still working, consider maximizing your contributions to retirement accounts and exploring catch-up contributions specifically available for people over age 50 in the USA. Every country has different rules so make sure you meet with a financial advisor to see how much you can contribute.
5. Learn how to manage your money and investments: If you’ve let your partner manage the money, it may feel overwhelming to take charge of your own investments. Meet with a fee-only, fiduciary financial advisor and take steps to increase your knowledge so you feel confident managing your finances. Investing doesn’t have to be complicated. I use Allocate Smartly to manage my investments and it automates the decision-making process.
Helpful Resources
A highly recommended resource is Divorce After 50: Your Guide to the Unique Legal and Financial Challenges by Janice Green. This insightful book helps women understand the complexities of financial planning during grey divorce, from dividing retirement accounts to managing health insurance. It’s an empowering resource that helps ensure you’re informed, prepared, and proactive about your financial future.
One excellent way to accelerate your journey to financial independence and secure your retirement post-divorce is to take our online FIRE (Financial Independence Retire Early) course. This easy-to-follow, comprehensive program provides strategies to build wealth, manage your finances wisely, and retire confidently.
