The Gray Divorce

There is no formal definition of a “gray divorce” or, as it is otherwise known, a “late in life divorce” but these terms are commonly used to describe divorces involving couples in their 50’s or older. Personally I feel “late in life” is a misnomer as a 50-year-old could easily live another 30-40 years, and I think sometimes a better description would be “late in work life” divorce. Many of the issues that pertain to older divorcing couples stem from the fact that neither party has more than 10-15 work years at the most to make up for lost income or assets, and that is only if they are still working. If one or both parties are retired, the opportunity to regain the pre-divorce lifestyle becomes even more difficult.

 In this situation the primary focus is on cash flow. Can each person sustain their new single lifestyle on their own income? Without enough work income one may need to draw on the assets they receive in the divorce right away. If these assets are retirement accounts, there will be taxes and penalties for withdrawing before age 59 ½.

 Medical insurance is another focus of gray divorce. Again, this is an issue that affects many older divorcing couples because the spouse without medical insurance may not have the opportunity to secure a job that offers insurance. This creates a gap in coverage between the time of divorce and age 65, when Medicare kicks in. The questions become: what are the options for securing insurance and who is going to pay for it? Some couples decide to separate and not divorce so that the uncovered spouse can have access to insurance at a reasonable cost.

 Knowing the Social Security laws is very important for older couples who are approaching the age of collecting benefits. Each is entitled to their own benefit or a benefit equal to half of the other spouse’s Social Security, whichever is greater.  Social Security offers divorced couples an opportunity to increase their own benefit by collecting a benefit based on their ex-spouse’s record temporarily and delaying their own benefit until (at most) age 70. The rules are a bit complicated and you should consult a financial adviser or call the Social Security Administration before making advice in this area.

 With younger couples the focus in the divorce might be on upgrading job skills or parenting plans. The focus on older divorcing couples is often making sure they can each survive on their half of the pie. Good financial planning is essential to a happy outcome for everyone.