More older couples are splitting — what does it mean for their retirement investments like 401K?
The kids are finally out of the house and financially independent. The mortgage is paid off and retirement is within sight.
Aging couples across the nation reflect on the sacrifices they made to get to this point and look forward to — a divorce.
A recent report from the National Center for Family and Marriage Research at Bowling Green University noted that the rate of divorce for Americans older than 65 tripled to about 25% between 1990 and 2021 and rose faster than all other age groups.
Divorce rates for those 45 to 65 rose at a lesser rate, while the divorce rate for those younger than 45 actually decreased over the 31 years.
Oswego County and the rest of Central New York, which has a significant population of older adults, is no exception to the gray divorce trend.
“The statistics are not surprising anymore,” said Jennifer Lovell, director of matrimonial consulting and litigation support for Bowers CPAs and Advisors in Syracuse. “It’s increased so much, especially in the past 10 years.”
Lovell said many of the clients she had worked with had been married for decades and waited until they were empty nesters to initiate a divorce. They weigh the financial consequences of remaining with their spouse versus “just wanting to be happy in their last years.”
“It certainly helps if you’ve been good with your finances,” she said, adding that in most cases, retirement investments like 401K are split as part of the divorce agreement. “But your earning power could go away in a minute.”
With older baby boomers, many women have been out of the workforce for decades. Until the 1980s, a working father and a stay-at-home mother were a typical family structure across the county. Women who returned to the workforce later in life helped with household expenses but may not have had the chance to build a career and reach their full earning potential. Family courts consider those events when the two sides hash out alimony agreements.
“It’s a different generation where mothers stayed home,” Lovell said. “When you go back to work in your 50s, the prospects for long-term savings aren’t that great.”
Spousal support is usually based on the length of a marriage, but courts are hesitant to make retirees pay alimony.
“Are you going to make him work past 65? That’s a really big issue here,” Lovell said.
Even for older adults, she said, divorce can result in poverty. Consider the increased risk of health and mental health problems.
Younger baby boomers are also part of the Sandwich Generation, where they are caring for their elderly parents while still financially supporting their children or even their grandchildren.
Millennials, by contrast, are more likely to get married at an older age, have children when they are more financially secure and have fewer children than their baby boomer parents. It’s not unusual for couples to have children years before they get married. Younger people often maintain separate bank accounts and are less likely to combine assets because they are cognizant that divorce is an eventual possibility, Lovell said.
“They’ve seen it with their parents or at least their friends’ parents,” she said. “I think this next generation is going to do it a lot differently.”
Adam Gould, vice president of wealth planning for the Syracuse office of Key Private Bank, a segment of Key Bank, said couples thinking about marriage should have conversations about financial planning for the future, even if it includes unpleasant topics like divorce, death, division of assets and likely inheritances of family money or property. That same spirit of cooperation between spouses should continue in the event of a split. Doing so avoids paying hourly rates for two lawyers.
It’s also essential for partners to understand all financial implications and know where and how they can get information about their and each other’s earnings, taxes, credit, investments, debts and longer-term financial plans.
“Technology has changed the way people can see their world,” Gould said. “It’s better to be upfront from the beginning and don’t be afraid to ask questions.”
Gretchen Miller, a Connecticut-based senior vice president of relationships management at Key Private Bank, said the removed stigma of divorces compared to decades past — coupled with the evolution of higher earnings for career-minded women near the tail end of the baby boomer generation or younger — is a significant factor in the increase of gray divorces.
Like Gould, she works with a wealthier clientele. With an essentially mobile professional workforce, couples often split because they disagree over where to live or where to retire.
Miller said it’s becoming more common for couples to hire one mediator or one lawyer and one financial planner to hash out the divorce instead of spending more money on two competing lawyers.
“We are quasi-marriage counselors. The objective is for both of them to decide what makes them happy,” she said. “It can be quite complicated and it can have a lot of moving parts.”
Miller advises couples to have a prenuptial agreement in place before officially tying the knot. She is quick to point out that when a divorce happens, most states don’t recognize common-law marriages where two partners are presumed to be married after being together a number of years in lieu of an actual marriage license, even if they had children together. She also said divorce can be a lot quicker and cheaper these days if couples consider all of their options, including financial planners, attorneys, mediators and even binding arbitration.
“There’s not just one way to get divorced,” she said.
U.S. Census data also indicates that older adults, whether due to divorce, the death of a spouse or never having been married, are increasingly living alone.
In 2022, there were 16 million folks older than 65 in that category, an increase of nearly 300% since 1970.
The Divorce.com website, which analyzes data from the U.S. Census Bureau, the Centers for Disease Control and Pew Research, indicates that, across all age groups, 69% of divorces are initiated by women, the main reasons being infidelity, unmet needs, deficient work-life balance and alcohol issues. It also says same-sex couples are 50% more likely to get divorced than different-sex couples.
The American Psychological Association reports that older adults face additional challenges after a divorce, including loneliness, especially if their children are out of the house and the split causes them to cut ties with mutual friends, in-laws, neighbors and other long-time acquaintances. In isolation, older adults are more likely to reflect on past events like careers and marriages as failures, leaving them prone to depression. There’s also the stress of making new end-of-life medical care and next-of-kin arrangements.
A National Library of Medicine research report noted that the likelihood of divorce in older adults in 2019 was twice as high after a second marriage and that divorce rates in older couples are much lower for those who have been married more than 30 or 40 years compared to those who were married for 20 years or less. It also reported that instances of gray divorce in 2019 were more common in Black couples (17.40 per 1,000 people), followed by Hispanics (11.95 per 1,000), whites (8.51 per 1,000) and then Asians (8.21 per 1,000).
A recent Key Bank whitepaper outlines nine primary considerations “when facing a divorce later in life:”
• Whether to keep or sell the marital home — Typically, the home is either sold immediately; transferred to one spouse or sold after the children finish school or turn 18.
• How to equitably divide assets — A split of retirement funds is typical in divorce settlements.
• How employee benefits factor in — If you have been married for 10 years but worked for your employer for 20 years, a pension split may be based on the 10 years of marriage.
• How to account for separate or inherited property — If the property is not comingled and remains in one spouse’s name, it might not be part of the settlement, but state laws vary.
• Claiming Social Security benefits on your ex-spouse — You are eligible to claim 50% of your ex-spouse’s record or 100% of your own, whichever is higher.
• Determining your cash flow as an individual
• Filing income taxes
• Reviewing your credit report
• Newly single — a few next steps.
“Divorce is one of the most stressful events in life, especially when it comes later in life,” the Key Bank white paper says. “Making informed financial decisions at this stage of the game is vital to your financial future. Be sure to build and maintain a network of tax and financial advisers to help you strategize your best options as you step into your next chapter.”
