The phenomenon of late-life divorce is blowing apart a lot of divorcing spouses’ best-laid retirement plans.
Between 1990 and 2010, the divorce rate among individuals 50 and older doubled, according to the National Center for Family and Marriage Research at Bowling Green State University in Ohio. In part because of increased longevity, late-life breakups now account for one in four divorces.
And they can destroy even the best financial planning.
Most couples plan for retirement on the assumption they will be living together. When that assumption falls apart, it’s not just a division of wealth but a doubling of the costs that makes both partners poorer.
Suddenly, it’s not one house or apartment but two with all the related expenses. You’re not sharing the cost of a visit to the grandchildren — you’re visiting separately. Overall, estimates of how much more it costs for two people to live separately rather than together are as high as 30 to 40 percent.
“[Divorce] is the largest financial transaction of your life, because every part is moving, from car insurance to credit reports to your ability to get financing,” said Jennifer Failla, a divorce financial analyst and mediator at Strada Wealth Management in Austin.
“People get into this process and they’re overwhelmed,” she said. “They don’t know what to do, and they start making rash decisions.” She and other experts advise beginning with the basics: “Start with what you own and what you owe.”
Sometimes that might mean your first call should be to a financial planner or an accountant rather than a divorce lawyer — especially if your spouse has handled most of the finances. A financial expert can help you understand what’s at stake and also may also note anomalies in accounting for your assets that suggest less than full disclosure.
And it’s important to understand more than just the face value of an asset. You need to understand the future value of assets because real estate perhaps is going to have a different growth than a deferred retirement account.
For instance a Roth IRA and a regular IRA may have equal balances, but withdrawals from the regular IRA will be taxable while those from the Roth will not because taxes were paid when the money was set aside to grow forever after tax-free.
Try to peel away the money from the emotions and try to understand the outcome you’re going to achieve and how that’s going to launch you into the next stage.