Divorce at any age is challenging, but for those over the age of 50, it comes with unique financial complexities that require careful consideration. An important statistic to note is that one out of every ten people getting divorced is now 65 or older. This trend, often referred to as "gray divorce," underscores the importance of understanding the financial implications of ending a marriage later in life.

If you are navigating a divorce later in life, you may feel like you’re starting over. Unraveling decades of combined financial assets and accounts can cause issues, but there are several unique financial planning opportunities you can focus on:

Key Financial Considerations for Divorce After 50

Loss of Health Insurance
Health insurance is often tied to employment or a spouse's benefits, and divorce can lead to the loss of this crucial coverage. If you were covered under your spouse's employer-sponsored plan, it's essential to explore your options for continuing coverage. COBRA (Consolidated Omnibus Budget Reconciliation Act) can provide temporary coverage, but it’s typically more expensive and only lasts for 18 to 36 months. After COBRA, you'll need to secure alternative insurance, whether through a new employer, the marketplace, or Medicare if you're eligible.

Here are some important steps we recommend to help you take action:  

• Evaluate your eligibility for COBRA.
• Explore marketplace options or Medicare if you’re 65 or older.
• Factor in the cost of new health insurance into your post-divorce budget.

Alimony Payments
Alimony, also known as spousal support, is more likely to be awarded in divorces after long marriages, which are common in couples over 50. The purpose of alimony is to help the lower-earning spouse maintain a lifestyle similar to what they had during the marriage. The amount and duration of alimony payments are determined by various factors, including the length of the marriage, the standard of living, and each spouse’s financial situation.

It's essential to understand how alimony will affect both parties. The recipient needs to consider how to manage these payments over time, while the payer must account for this ongoing financial obligation in their retirement planning.

Wondering where to begin? Here are three crucial factors to keep in mind when seeking alimony. 

• Work with a financial advisor to understand the tax implications of alimony payments.
• Ensure alimony is structured in a way that aligns with both parties' retirement plans.
• Consider how changes in income, such as retirement, may impact the amount or necessity of alimony.

Retirement Accounts and Pensions
Retirement savings are often one of the most significant assets for couples over 50. During a divorce, these accounts can be divided, impacting both parties' financial futures. It’s crucial to understand how assets like 401(k)s, IRAs, and pensions will be split, as this can directly affect your retirement plans.

A Qualified Domestic Relations Order (QDRO) is often required to divide retirement accounts without incurring penalties. Additionally, understanding the tax implications of withdrawing from these accounts is vital to avoid unexpected financial hits.

If this is something that applies to you and your financial situation, remember these key pieces: 

• Ensure a QDRO is correctly drafted and implemented for retirement account division.
• Reevaluate your retirement plan and adjust savings strategies if necessary.
• Consult with a tax professional to understand the tax implications of dividing retirement assets.

Social Security Benefits
If you were married for at least 10 years, you might be eligible for Social Security benefits based on your ex-spouse's earnings record. This could be beneficial, especially if your ex-spouse had a significantly higher income. However, these benefits won't reduce your ex-spouse's payments and can be a vital source of income during retirement.

If you do qualify for Social Security benefits, we recommend that you review your eligibility for Social Security benefits based on your ex-spouse’s record. You should also consider the timing of when you claim Social Security to maximize benefits.

Additionally, be sure to factor these benefits into your overall retirement income strategy.

Housing Considerations
Deciding what to do with the family home is often one of the most emotionally charged aspects of a divorce. For many over 50, the family home represents both a significant financial asset and a place of emotional attachment. Whether you choose to sell the home, buy out your spouse, get bought out yourself, or continue living in it, this decision will have long-term financial implications.

At Thielen & Associates, Inc. we recommend these three steps when considering what to do with your home in the midst of a divorce: 

• Assess the affordability of keeping the home on a single income.
• Consider the benefits of downsizing or relocating to a more affordable area.
• Include potential capital gains taxes and maintenance costs in your decision-making process.

Divorce after 50 is a life-altering event that requires careful financial planning. By understanding the key considerations, such as loss of health insurance, alimony payments, and the division of retirement assets, you can navigate this challenging period with greater confidence and security. Working with a financial advisor who specializes in divorce can provide the guidance needed to protect your financial future and ensure you make informed decisions.

Disclosure:

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