How divorce can impact both your current and long-term financial situations
While the divorce rate has evened out nationally, there’s one area where it hasn’t: among those 50 and older in age. In this demographic, divorce is actually increasing, doubling between 1990 and 2010.1 Roughly a quarter of all divorces happened to those 50 and older, according to the National Center for Family & Marriage Research. The trend is predicted to continue over the next two decades.
Post-50 divorce can be more complex to resolve because assets have had decades to commingle. As children leave the house and couples approach retirement, financial needs also change. Those facing divorce need to consider both their current and long-term financial situations so that they have an equitable division of assets and a solid financial foundation moving forward.
Divorce rate for adults ages 50 and older has roughly doubled in the past 25 years
Number of persons who divorced per 1,000 married persons in given age group
Note: Divorce rate is the number of persons who divorced per 1,000 married persons in the year prior to the survey among adults in that age group. Percent change calculated before rounding.
Source: Pew Research Center Analysis of the 2015 American Community Survey (IPUMS) and 1990 Vital Statistics following the methodology in Brown and Lin’s "The Gray Divorce Revolution: Rising Divorce among Middle-Aged and Older Adults, 1990-2010."
The baby boomer generation changed basically everything about our society, and that includes divorce, says Carol Lee Roberts, CDFA®, CFP®, general manager of the Institute for Divorce Financial Analysts. "This is really the first group that got married for love and happily ever after."
There are many contributing factors to this growing divorce rate, both emotional and financial. Kids are moving out of the house. People are also living longer, so the idea of staying in an unhappy marriage for another 30 years isn’t acceptable.
Many also feel less financially tied to their spouse than they did a few years ago. With the economy recovering, individuals have more financial security—their homes aren’t underwater and with pre-existing conditions currently covered by health insurance, people don’t feel obligated to remain on their spouse’s health insurance to guarantee coverage.
Gray divorce more likely among those who have been married multiple times or for fewer years
Number of persons ages 50 and older who divorced per 1,000 married persons in that age group, by number of marriages and duration of last marriage
Duration of marriage (years)
Note: Divorce rate is the number of persons who divorced per 1,000 married persons in the year prior to the survey. The divorce rates by duration of marriage exclude those who had divorced and then remarried in the year prior to the survey since the data reflect the time in their current marriage.
Source: Pew Research Center analysis of the 2015 American Community Survey (IPUMS).
Divorce is a huge financial decision. It's beneficial to get help with it as early as possible to make sure everything is examined, Roberts says. Couples going through divorce often contact an attorney first, but experts say that may not be the best move financially.
"Very few people go to law school because they love numbers. People go into financial planning because they want to help people and they enjoy numbers,” Roberts says. “Having a financial planner who can work the numbers of your divorce removes some fear from the process."
SunTrust Investment Services, Inc. Private Financial Advisor and Certified Divorce Financial Analyst® Alexander Hernandez2 helps clients determine what’s important and how that dictates their future financial plans.
"I want you to use your attorney for what they are there for. Otherwise you may waste your attorney's time, and that will end up costing you a lot of money," Hernandez says. As you go through or emerge from a divorce, you should consider the following.
- Establish a budget that aligns with your new financial picture.
- Create projections that show how your financial decisions today can impact your future.
- Ensure your qualified domestic relations order (QDRO) is fully vetted and your retirement plan is protected.
- Draft a solid plan for major assets.
Hernandez helps clients figure out a "hierarchy of importance" so they can budget accordingly. You will likely have less income to work with initially, so having an objective third party review your finances can be helpful, Hernandez says.
An advisor can see how your assets may change over time, whether they will appreciate or depreciate and how they may be taxed. This will help prevent a seemingly valuable asset from becoming a financial drain.
Qualified retirement plans, such as a pension plan or a 401(k), require a QDRO to separate. These plans can quickly become complicated, and if a qualified financial professional does not handle them, an inequitable division of assets may result. You will also need to re-establish your retirement savings goals and plans, and may need to open accounts or invest your assets differently.
You will need to evaluate major assets, such as the home; whoever lives there may want or need to sell it and downsize. You will need to find a qualified attorney that understands your specific state rules. And having a financial advisor that can properly guide you through the financial aspects that are often missed is paramount.
Working with the right professionals can help plan for an equitable division of assets over time, taking into account tax considerations, appreciation and depreciation of assets and intricate rules surrounding retirement accounts and other investments.
1 "The Gray Divorce Revolution: Rising Divorce among Middle-aged and Older Adults, 1990-2010," National Center for Family & Marriage Research
2Alex Hernandez, Investment Adviser Representative, SunTrust Advisory Services, Inc.
SunTrust Bank and its affiliates and the directors, officers, employees and agents of SunTrust Bank and its affiliates (collectively, "SunTrust") are not permitted to give legal or tax advice. Clients of SunTrust should consult with their legal and tax advisors prior to entering into any financial transaction.