The Gray Divorce: Baby Boomers at 50 and Beyond
As with so many of life’s assumptions, Baby Boomers are busting through many of the myths regarding aging. Now entering their 50’s and 60’s, Baby Boomers consider this period the “youth of our old age.” The notion of “until death do us part” has eroded; people over 50 want their golden years to be romantic and energized.
The flip side of this vision is an increase in divorce. Baby Boomers expect so much more of marriage than previous generations did. When a marriage doesn’t live up to those expectations, divorce is now a much more acceptable option than it used to be.
Fifty years ago, only 2.8 percent of Americans older than 50 divorced. Today more than 17% of people over 50 are either divorced or separated. Like many trends, this particular one has been labeled as Gray Divorce. Some reasons are:
- Many people over age 50 are in their second or third marriage, making them statistically more prone to divorce.
- The emphasis on a healthy and active life style.
- Increased life expectancy.
- Increased work experience and greater independence.
- The empty nest.
- Medicines that promote intimacy for men and women.
For a comprehensive overview of the economic impact of divorce on people over age 50, refer to this article, NYSBA Journal: Gray Divorce and Remarriage.
The Economic Divorce
Regardless of age or the length of the marriage, when a marriage ends, the couple has to consider the legal, financial, and emotional elements of the divorce. The elements of gray divorces often require different strategies in those areas than divorces occurring earlier in life.
In most cases, the couple either has grown children or had no children as a couple, so little conversation regarding children and parenting is needed. The emphasis is usually on the economics of the marriage, such as:
- Marital property.
- Social Security.
- Spousal maintenance.
- Health benefits.
Marital Property Distribution
The two largest assets for people older than age 60 are typically their houses and their retirement assets.
Marital Property: The House
At this stage, it is not unusual for a marital residence to have only a small or no mortgage at all. Therefore the equity in the home can be significant. In a divorce it is considered to be similar to a savings account. They can either sell the property or one person can buy the other out. My post about trading house equity for retirement dollars works through the house asset in more depth.
Some considerations in a gray divorce are:
- If either party takes over the home, this can be a financial burden on the new owner in a collapsing real estate market. Also, he/she will have to be eligible to secure a mortgage at time when he/she may have a fixed income.
- If they sell the property, each has the option to purchase something else or rent. Either way, each will have a monthly expense they may not have had if they paid their mortgage in full during the marriage.
Marital Property: Retirement Funds
If there are retirement funds such as 401Ks or IRAs, they are intended to supplement Social Security or reduced incomes from full-time or part-time jobs. Withdrawals from these funds may have already been started. As part of the divorce, it is likely that these funds will be shared. As a result, each person will potentially have less money to rely on going forward.
For those over age 60, even though you may be able to withdraw funds from these accounts without penalties, you still need to have a Qualified Domestic Relations Order (QDRO, pronounced “kwa-dro”) prepared to distribute the funds from one to the other to avoid unexpected tax consequences. The QDRO is prepared by an attorney and is an additional document prepared as part of the divorce filing.
Marital Property: Pensions
Often my clients over age 60 who have retired are already receiving a monthly pension check from a previous employer, such as a school district, fire department, police department, or corporation. This monthly income is also considered an asset and can be shared between the couple. Sharing the monthly annuity also requires a QDRO prepared at the time of the divorce. After the QDRO is processed, each party receives their portion directly from the pension fund. My post about distributing pension funds through divorce works through pensions in more depth.
Social Security Benefits
Social Security (SS) benefits, including how those benefits are distributed after divorce, are governed by federal law, not state or matrimonial law. For an person to be eligible for the Social Security benefits of an ex-spouse, the couple had to have been married for more than 10 years.
Some highlights to consider:
- You can receive 100% of your own SS benefit or 50% of your ex-spouse’s benefit, whichever is higher. Your ex-spouse will always receive 100% of his or her SS benefit. Your additional SS as the ex-spouse is funded by the US government.
- As an example, if Mary’s SS benefit is $800 per month and Joe’s SS benefit is $2,400, Mary will receive $1,200 (50% of Joe’s value) after the divorce, and the government pays the difference between $800 and $1,200.
- If you remarry before age 60, you will forfeit this benefit. (There are some exceptions).
The idea of “equalizing” the Social Security benefit such that each person receives the same amount is something that is “negotiated” and not mandated by law. For example, if Mary and Joe wanted to share $800 + $2,400 =$3,200 per month equally each person would receive $1,600. In this case, Joe would have to pay Mary the additional $400 on top of her $1,200 every month.
This is a complicated topic. Please review the official Social Security web site about how Social Security benefits are handled in a divorce.
The guidelines for spousal maintenance (SM) include numerous factors that are to be considered. The most well-known and perhaps most compelling factors are:
- Length of the marriage.
- The health of each person.
- The employability of each person.
- The disparity of income or income potential between the spouses.
What my clients have to consider is how each person will live self-sufficiently after the divorce. If one or both persons are still working, then the issues are how to share income between the two and how long someone is “expected” to work.
To see a complete list of the 20 factors that are considered for spousal maintenance, please refer to http://www.jdbar.com/Articles/maintenance.html
Just as with younger divorcing couples, any health insurance benefit one spouse receives through the other spouse ends upon divorce. This is the same for couples receiving health insurance through a retirement plan. It is very important to consider how to bridge health insurance until Medicare eligibility occurs at age 65 for the person who will no longer be insured. Often this is accomplished by processing the end of your marriage as a legal separation rather than going right to a no-fault divorce.
A Passionate Future Is Possible
According to Stephanie Coontz, author of Marriage, a History, “The extension of an active, healthy life span is a big part of the rising divorce rate. If you are a healthy 65, you can expect another pretty healthy 20 years. So with kids gone, it seems more burdensome to stay in a bad relationship, or even one that has grown stale. We expect to find equality, intimacy, friendship, fun and even passion right into what people used to see as the ‘twilight years.'”
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