Here’s a curious fact: Since 2002, the Centers for Disease Control has not been getting enough data from Minnesota about divorce, and the agency stopped trying to estimate the state’s divorce rate after 2004. It seems that statistics for marriages and divorces are maintained only at the county level. Why should we care about what the current divorce trend is in Minnesota? As with the rest of the country, we have a new phenomenon exploding among baby boomers: gray divorce, or divorce among adults over age 50.
Among U.S. adults over age 50, the divorce rate has doubled since 1994 and risen more than 700 percent since the 1960s. The gray divorce phenomenon is much examined because of its impact on the economy and on younger generations, and there are surprisingly many nuances in the gray divorce statistics.
Whereas the U.S. national rate of divorce has remained stagnant for nearly 30 years, these trends noticeably reverse themselves starting around age 45, where the percentage of divorced individuals significantly increases. Almost 1 in 4 adults 50 and older are divorced, compared to less than three percent a half century ago. Contrary to expectations, long-term marriages are not immune, and the largest increase (55 percent) is in first marriages of more than 20 years.
It helps to take a step back to be able to identify key triggers for late-life divorce and highlight what happens in divorce to illuminate opportunities for clients to maximize post-divorce financial security.
The biggest risk factor for divorce is not life’s transitions (which seems counterintuitive when you’re over the age of 50), but one’s marital past. It stands to reason that, with our increased longevity and perhaps more years of being disability free, couples are simply at risk of divorce for more years than they were in the past. Changed attitudes and finances may ease the way to divorce as well.
It is imperative for advisers to understand what boomers want, what boomers experience and what the consequences of gray divorce are relating to financial security.
What do boomers want? It seems that boomers want the same as any divorcing couple: higher standards in relationships, being more fulfilled and feeling entitled to living more fully. At age 50-plus, more women initiate divorce than men.
What will they experience? Older couples worry about key financial issues:
- Will the income be enough when divided between two households?
- Concerns about health care spending and the probable need to downsize
- Anxiety about retirement and outliving one’s assets
- Apprehension about financial independence and being alone
What does divorce mean for older couples? Late-life divorce presents a wide gamut of challenges for competing financial resources and conflicting goals.
Divorce on the cusp of retirement exposes many marital faux pas or missteps in planning for and attaining enough retirement resources. The combination of many factors can result in financial sticker shock, just as divorce explodes on the horizon.
Compared to single people, married couples accumulate about four times more savings and assets. Those who divorce end up with 77 percent less wealth than single people. Sadly, for the eternally hopeful soul, this financial scenario can worsen with the divorce echo effect: 48 percent of first marriages, 60 percent of second marriages and 73 percent of third marriages end in divorce.
The consequences of late-life divorce can be especially hard for older women. Women age 60-plus report a post-divorce income decline of 45 percent, and nearly a third of women (compared to 11.4 percent of men) are living below the national poverty rate. Older divorced women typically have little or no emergency savings, and a concerning percentage of women are forced to dip into retirement assets long before they reach retirement age.
At the end of the day, late-life divorce presents limited time to recoup losses, re-establish careers, become knowledgeable about finances, or bounce back from psychological and emotional depression. However, advisers are an underutilized resource in divorce. At the 2019 FPA Annual Conference, advisers will have the opportunity to learn strategies for working with age 50-plus clients and five key topics to protect and preserve wealth for divorcing couples. We’ll identify unique opportunities available during the divorce process to help you maximize your client’s post-divorce financial position.
With clear financial navigation, the outlook is much brighter post-divorce. With people living longer, it makes sense not to spend retirement years in an unhappy union. If your client is prepared financially, retirement should not feel like the end, but instead like a new beginning.
Lili Vasileff is a fee-only CFP®, Master Analyst in Financial Forensics (MAFF™) specializing in Matrimonial Litigation, CDFA®, and President of Wealth Protection Management in Greenwich, CT. Lili will be speaking about gray divorce at the 2019 FPA Annual Conference, and you can connect with her on LinkedIn at https://www.linkedin.com/in/lilivasileff.