Atlanta Financial Blog
Gray Divorce Is Rising. What Could That Mean For You?
March 19, 2019
“Gray Divorce,” or divorce among couples 50 or over, has risen dramatically over the last few decades, more than doubling since 1990 according to a Pew Research Center report. During this same time period, the divorce rate overall has fallen. So why are we seeing such a spike in the divorce rate for older Americans?
Reasons cited include:
– Longer life expectancy and better health – The prospect of a long life ahead can lead couples who are unhappy to envision and demand more out of life.
– Empty nest syndrome – Without the focus and buffer of children, many clients find they have grown apart and opt to separate rather than continue as a couple.
– Money troubles – If a couple isn’t united in terms of financial priorities, years of financial conflict and the prospect of retirement looming closer can cause couples to throw in the towel.
– Social and cultural changes – The decline of the stigma associated with divorce, coupled with the rise of online dating services can reduce anxiety about the process and prospects “on the other side.”
– Improvement in pay and career options for women – With advancements in the workplace, more women unhappy in their marriages feel empowered economically to make a change.
– Other causes – And of course there are the other usual causes impacting all age groups, such as addiction and infidelity.
If you find yourself part of this growing trend, what should you know?
• Get Realistic. It’s extremely important to be realistic about your financial situation, both in terms of income and expenses, and assets vs. debts. Understand that your expenses won’t drop in half just because you divorce. If you are seriously contemplating a divorce, it’s also important to understand the likely RANGE of outcomes for a settlement. Spending some money on legal consultation and working with an advisor to understand your possible outcomes and future needs is a critical step in approaching an imminent divorce with confidence.
• Don’t Rush Changes. If you believe a divorce is likely, don’t make any major financial changes prior to getting advice. If you feel burdened by debt, don’t rush to pay it off outside of a negotiated settlement. The unintended consequence may be to reduce your share of the marital estate or cause you to lose negotiating leverage.
• Do Your Homework. Understand all retirement benefits available to you and your spouse, including long-forgotten pensions, retirement accounts and Social Security benefits either of you may be entitled to.
• Don’t be House Poor. Often, especially if children are still at home, one spouse may make retaining the marital home their top priority. Have an advisor assist you with understanding what level of housing expense is sustainable long term. It is especially dangerous to use alimony to offset housing expenses you couldn’t afford otherwise. What will you do when alimony ends?
• Look Long Term. Don’t focus on a settlement that solves current cash flow problems at the expense of the long term. How will you live in retirement? If you will receive alimony, you may need to carve some of that off for savings to build investments that can sustain you when alimony (and employment) end.
• Be Tax Wise. Make sure you consider taxes in structuring your settlement and accessing funds. Rely on a financial professional to help you with this aspect of the settlement.
• Don’t Forget about Insurance. Insurance issues can be especially important. What happens to your alimony or child support if your ex-spouse becomes disabled or dies? Make sure your agreement addresses these risks.
• Get a Pre-Nup. If your marriage does end in divorce, before remarrying be sure to have a pre-nuptial agreement in place. The financial trauma of a second divorce can be extremely difficult to overcome.
While no one enters into marriage expecting to divorce, especially after a decades long relationship, often it is the right move. Remember the words of caution above. And most importantly, get excellent legal and financial advice before starting the official process and all along the way. Contact me at 770-261-5382 or email@example.com if we can help in any way.
The Setting Every Community Up for Retirement Enhancement (“SECURE”) Act was signed into law on December 20, 2019. With all of the discussion in the news around the political uncertainty, impeachment, and the looming trade war, one of the largest changes to retirement savings laws in recent years was passed with very little fanfare. However, some of the changes will be significant. I have tried to highlight what may impact the majority of our clients and readers.
The Act has a lot of positives such as simplifying rules and making 401k plans potentially available to more workers, pushing back the RMD age, and allowing contributions to IRAs past age 70. The negative impact I see is the elimination of the stretch IRA which is a clear move by the government to raise tax revenues by forcing money out of inherited IRAs sooner. I will discuss in more detail below, but this should be a time to review beneficiaries and discuss whether any change in your legacy planning should be made in response to the new laws. What do you need to pay attention to?
A few months ago, I saw a sale sign in front of my neighbor Gina’s house. She’s lived on my street even longer than I have, so I was surprised that she was selling her home. I bumped into her a week later at the supermarket and asked her where she was planning to move. She told me (with some regret) that she was downsizing to a less expensive house. The alimony payments she’d been getting from her ex-husband had ended last year, and she hadn’t prepared for the loss of that income. She soon realized she could no longer afford to live in her home.
I’d like to believe that everyone understands the value in a year-end review of their personal finances. Statistics that I’ve seen indicate that over half of people who make resolutions indicate a change to household finances and saving money is a priority in the new year1. What is a bit of surprise to me is that so many put off (or neglect all together) actually reviewing their finances before year’s end. My conclusion: one of the biggest deterrents is the time it takes to get things organized.
When it comes to being successful with money, strong organization will empower you more than anything else you can do to take control of your finances moving forward. With my personal and professional understanding of the challenges of this process, I’ve put together an 8-step checklist to get your finances organized, take inventory of where you stand, and ultimately get you ready to close the books on 2019.