The Effects of Divorce on Retirement
I spent last week at my in-laws' cabin, a summer ritual before school starts.
The weather was cool, so swimming in a lake was not on my children's minds every day.
We spent more time just hanging out, which in four-kid terms means eventually getting in each other's way.
The summer is starting to get long, and I saw it first-hand; when we got home from the cabin each child went to a different part of our house and didn't talk to each other for hours.
Finally, I has some peace and quiet, and in that peace and quiet I had a fleeting glimpse of what retirees go through.
Work consumes at least a third of our day.
For many people, who they are is largely determined by their work, to the point that they define their friendships by who they work with.
So it is no surprise to me when I see people get to retirement and suddenly they feel lost when they don't have an office to go to.
It almost feels like one day they felt they were valuable, and the next day they did not.
I often remind clients that one of the biggest shocks to their way of life is the first six months of retirement, when all of a sudden a couple has to live together 24 hours of the day.
Many will smile, say nothing, but later come back to tell me that there was more truth to what I said than they imagined at the time.
For some people, the road after children and entering retirement might include divorce.
A study by researchers at Bowling Green State University shows that divorce rates for those over age 50 has doubled in the last 20 years.
In 1990, less than one in ten couples divorced at that stage of life, but in 2008 that number had risen to one in four (see Divorce in Middle and Later Life: New Estimates from the 2009 American Community Survey).
Divorce later in life has large implications for retirement.
While not an exhaustive list, here are six issues to think about:
So if I added a seventh point to my list, I would suggest hiring a financial planner to help assess your retirement needs prior to thinking about divorce.
I am not saying people should stay together just for money reasons (nor am I advocating divorce as the only answer for a couple's problems).
But there needs to be an understanding of what is and is not possible so that no one involved is blindsided.
The weather was cool, so swimming in a lake was not on my children's minds every day.
We spent more time just hanging out, which in four-kid terms means eventually getting in each other's way.
The summer is starting to get long, and I saw it first-hand; when we got home from the cabin each child went to a different part of our house and didn't talk to each other for hours.
Finally, I has some peace and quiet, and in that peace and quiet I had a fleeting glimpse of what retirees go through.
Work consumes at least a third of our day.
For many people, who they are is largely determined by their work, to the point that they define their friendships by who they work with.
So it is no surprise to me when I see people get to retirement and suddenly they feel lost when they don't have an office to go to.
It almost feels like one day they felt they were valuable, and the next day they did not.
I often remind clients that one of the biggest shocks to their way of life is the first six months of retirement, when all of a sudden a couple has to live together 24 hours of the day.
Many will smile, say nothing, but later come back to tell me that there was more truth to what I said than they imagined at the time.
For some people, the road after children and entering retirement might include divorce.
A study by researchers at Bowling Green State University shows that divorce rates for those over age 50 has doubled in the last 20 years.
In 1990, less than one in ten couples divorced at that stage of life, but in 2008 that number had risen to one in four (see Divorce in Middle and Later Life: New Estimates from the 2009 American Community Survey).
Divorce later in life has large implications for retirement.
While not an exhaustive list, here are six issues to think about:
- Assets.
Many couples have not saved enough for retirement and divorce only highlights that point.
Two single people will spend more than what they would as a married couple.
If you're getting divorced, you'll need to adjust your expectations or you may overspend and only figure out 10 years later that you are running out of money. - Income.
Divorce brings a split in income.
If someone is receiving a pension, it may be halved by divorce.
Note that if you were married more than 10 years, you can receive a Social Security benefit from your own record or your ex-spouse's record, whichever is higher. - The House.
In today's world, the house is less of an asset than it used to be.
But it may still have an emotional draw if you raised a family there.
Yet one of the bigger mistakes people make is to keep the house after divorce.
Usually, the house is too big for one person.
A house also comes with a lot of expenses that will only deplete assets or income.
Invariably a year or two down the road this becomes evident but then only one person (you) is on the hook if you sell the home for less than the agreed upon value in the divorce. - Credit.
Many couples share credit cards but if a spouse is non-working, they might only be listed on the card as a user, not the actual borrower.
This means they were not building a credit history of their own, which could be a problem in applying for any kind of credit later in life (this applies to anyone, including widows and widowers). - Health Care.
Often the primary caregiver is a spouse.
If you're no longer married, consider buying more insurance of all kinds (including long-term care insurance) to make sure there is someone to take care of you. - Estate.
One of the biggest issues forgotten in a divorce is amending estate documents and beneficiaries.
I often find ex-spouses still listed as a beneficiary, which probably is not what is truly wanted anymore.
So if I added a seventh point to my list, I would suggest hiring a financial planner to help assess your retirement needs prior to thinking about divorce.
I am not saying people should stay together just for money reasons (nor am I advocating divorce as the only answer for a couple's problems).
But there needs to be an understanding of what is and is not possible so that no one involved is blindsided.
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