Gray Divorce: Special Financial Considerations for Baby Boomers Facing Divorce

By Lisa C. Decker, CDFA

According to research from the last two decades, the overall divorce rate in America is declining, except for those among the baby-boomers generation. Drs. Susan Brown and I-Fen Lin, two sociologists from Bowling Green State University, conducted a study on divorce among older couples and released their findings in a 2009 proposition titled “The Gray Divorce Revolution.” Their findings show that the divorce rate for age-50-and-older couples has doubled in the last twenty years.

Dr. Brown is the co-director of the BGSU’s National Center for Family and Marriage Research. She was recently interviewed by John Donvon on National Public Radio’s Talk of the Nation about their findings. This audio interview, as well as a text-only transcript, can be found on NPR’s website (i).

Their research points to several factors for this phenomenon:

  • “The Marital Biography” – Because baby-boomers came of age during the 1970’s and early 1980’s, they may have experienced or witnessed divorce among their family and friends. Many who have gone through divorce once have since remarried, which statistically makes them more likely to divorce again (ii).
  • Change in Societal Mores – Divorce has become more accepted in today’s social arena and is considered a much more plausible option in troubled unions heading down that path.
  • Personal Idealisms – Marriage as a lifelong institution has weakened in the midst of individuals looking for self-fulfillment and personal happiness. Many are unwilling to settle for less than what they truly desire in their mate or in their marriage.

The American Association of Retired Persons, or AARP, also conducted a study called, “The Divorce Experience: A Study of Divorce at Midlife and Beyond (iii).” Their research team interviewed over 1,100 men and women who divorced between the ages of 40-60 years old.

According to this study, one of the biggest reasons that they wait so long to file for divorce is the possible emotional and financial impact the divorce will have on their children, regardless of age. Respondents also cited abuse – verbal, physical and emotional – as the leading cause of their divorce followed by cheating, substance-abuse, and differences of lifestyle and values.

I find that the majority of my clients fall into this “Gray Divorce” category, often with other contributing factors. One that often comes up is known as “Financial Infidelity,” or irresponsible financial spending habits on the part of one spouse without the knowledge of the other. Sometimes, it’s a job-loss or illness that starts them down that path; other times, it’s trying to maintain a lifestyle they can no longer afford. However, no matter the reason, if one spouse is trying to keep the other in the dark about the family finances, it’s a sure-fire way for the marriage to start down a slippery slope toward divorce.

Divorce at any age can be fraught with financial problems, but Gray Divorces have special financial concerns. Here are a few examples:

  • There are generally two subsets of women when it comes to gray divorce: professional career women who may potentially be faced with paying alimony to a lesser-earning spouse and stay-at-home wives and mothers who have handled the home front and helped push their husbands up their career ladders. These subsets will encounter very different financial needs.
  • Retirement is a big consideration. Gray divorcing couple’s face fewer years left to earn and recover from divorce, as well as to save for retirement.
  • Baby-boomers tend to have larger, more expensive homes, which can be a challenge to sell or to keep and maintain on one income. For the “in spouse” who will keep the house, special care needs to be taken to make sure pre-qualification for refinance can occur. This piece is critical to remove the “out spouses” name, and therefore liability on the note, prior to the divorce to avoid potential problems down the road.
  • Older people tend to have more health issues, making health and long-term care insurance hot issues in divorce. Filling the gap between the time of the divorce and the qualifying age for Medicare is vital.
  • Backing up any promise to pay, such as alimony, is very important. The most common way is to carry life and disability insurance on the paying spouse. Unfortunately, he/she may have health issues and won’t qualify. In this case, looking at other assets to collateralize or getting a larger share of the assets upfront instead (the bird in the hand approach) are options that can be looked into during negotiations.
  • In all cases, gray divorce or not, making sure that tax issues are reviewed prior to the divorce is important. This ensures that neither spouse ends up owing a tax bill that could have been reduced, or perhaps avoided altogether, in the first place.

i. http://www.npr.org/2012/03/08/148235385/gray-divorce-over-50-and-splitting-up
ii. http://www.psychologytoday.com/blog/the-intelligent-divorce/201202/the-high-failure-rate-second-and-third-marriages
iii. http://assets.aarp.org/rgcenter/general/divorce.pdf

Lisa C. Decker is an expert in divorce financial matters. As a discreet problem-solver and trusted advisor she utilizes cutting edge tools and industry insight to guide her clients to “Divorce Your Spouse, Not Your Money®.” Further information can be found at www.DivorceMoneyMatters.com.

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