Divorces are skyrocketing for people in their 50s and 60s.
Between 1990 and 2012, the number of divorces among people 55 to 64 more than
doubled and tripled for those 65 and older, according to a study by Susan
Brown, I-Fen Lin and Krista Payne of Bowling Green State University. On top of
the personal pain, divorcing spouses often face extraordinary
financial pain.
Recovering From a
Gray Divorce
As the Bowling Green researchers’ report, Marital Biography,
Social Security and Poverty, noted: Those who divorce earlier in adulthood
have more time to recoup the financial losses divorce usually entails. In
contrast, those who divorce later have fewer years of working life remaining
and may not be able to fully recover economically from a gray divorce. Said Christine
van Cauwenberghe, assistant vice president of tax and estate planning with the
Investors Group financial advisory firm in Winnipeg, Manitoba: “Going through a
divorce can be difficult at any age, but older couples face unique challenges
in retirement planning as a result of later-in-life separations.”
Reassessing Your
Financial Plan
That’s why, if you’re divorcing in your 50s or 60s, it’s
crucial to reassess your financial plan to ensure that it reflects your new
direction in life. Although the freedom divorce offers may be refreshing, the
danger in becoming single at a later age is being one step closer to retirement
without a partner and potentially with half the income.
Changing Beneficiaries
and Power of Attorney
As a newly single person in or near retirement, you’ll want
to be sure to change the primary and contingent beneficiary
information on all your life insurance policies and pension and retirement
accounts. “It’s the most overlooked, and also the most important, action to
take after a divorce because beneficiary designations supersede any will,”
said Gary Plessl, a certified financial planner, CPA and managing partner
with the Houser & Plessl Wealth Management Group in Allentown, Pa. Changing
the designated power of attorney on estate planning documents is just
as important and can be a matter of life or death.
Use the Catch-Up
Rules for Retirement Saving
To help your finances recover faster after a post-50
divorce, try to take advantage of the catch-up rules for retirement
contributions. They let people 50 and older stash more in 401(k) and IRAs than
younger people. In 2016, the catch-up provision lets you save an additional
$6,000 over the standard $18,000 limit for 401(k)s and an extra $1,000 in a
traditional or Roth IRA beyond the normal $5,500 maximum.
Debt and Cash Flow
Typically, divorced couples split marital debt, but
paying off loans and credit cards later in life can be difficult due to cash
flow issues. So this is also something you’ll want to focus on, perhaps with
the help of a financial adviser or credit counselor.
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article on Forbes.