Divorce has more financial risks when you’re close to retirement

Posted by Lauren S. CohenJul 21, 20200 Comments

Older adults have been considering divorce at higher rates than in decades past. Couples who have been together for decades may now find that, with their children and retirement looming, they are not happy in their existing relationship.

Gray divorces, or divorces between couples who have been married for some time and who are close to or past the age of retirement, are common, and they are nothing to be ashamed of if you find yourself considering one. However, the closer you are to retirement age, the more likely it is that your divorce will have implications for your financial stability in your golden years.

You may have retirement assets to rely on

You may have spent several decades saving and investing in order to ensure a decent standard of living during your retirement. A single divorce can completely undermine all of those years of effort.

Some couples find that they have to dip into their savings or retirement accounts in order to cover the costs of the divorce itself. Even if you don't have to do that, you will likely find yourself dividing those retirement assets, which means you will only have about half of what you expected to be able to live on during your retirement.

Living at home mortgage-free may no longer be an option

Sometimes, retirement planning involves budgeting for your future. Knowing that you can live in your home after you pay off your mortgage without a monthly mortgage can drastically reduce how much it will cost for you to take care of yourself after retirement.

Unfortunately, even if you retain the house, chances are good that you will have to cash out a significant portion of the equity and refinance the property as part of the divorce. That means you may have to factor in a mortgage payment when recreating your budget.

You may not have much time to rebuild your diminished savings

Those who get divorced earlier in life have several decades during which they can rebuild their financial circumstances and prepare for retirement. You might only have a few years, or you may already be enjoying your retirement. You may have to consider going back to work or taking out a part-time job in order to cover your costs during and possibly after a gray divorce.

If you understand and accept these complications, it can make it easier for you to gracefully pursue a gray divorce and enjoy your golden years with the freedom and security you deserve.