What Major Financial Implications Does Your Gray Divorce Have on Your Life?

The last few decades have witnessed an uptick in the rate of divorces among people of ages 50 and above. According to Pew Research Centre, the demographic trend of divorce after a marriage of twenty or thirty years has doubled between 1990 to 2015. Starting a new chapter at this age may not be simple, but if you plan your finances right, you may encounter lesser difficulties in your new life.

What is a Gray Divorce?

A gray divorce is the separation of older couples married for a long time. Gray divorcees get the name owing to the hair color that people of this age often have. In the United States, the term 'gray divorce' has been in use since 2004, but divorce after 50 years of age has been prevalent for much longer. There are various complications that people going through a gray divorce face, including financial difficulties, emotional trauma, and social challenges. But experts say that many gray divorcees can turn this adverse event into a positive influence on their lives. All you need is good financial planning and a positive outlook.

Financial Challenges of a Gray Divorce and Their Solutions

1. Lesser Income & Assets: The most significant financial challenge of a gray divorce is the dent in retirement planning. Couples who have spent decades planning their retirement together suddenly find themselves deprived of half their savings. Their earning years are almost over, and they flounder to compensate for what they have lost. The struggle is worse for the non-earning spouse. Finding a steady source of income at an advanced age is tough. Solution: A gray divorce may open up a one-time opportunity for some spouses to withdraw from their 401(k) account before the lawful age of 59.5 years, without a tax penalty. It is permitted only under a qualified domestic relations order. It calls for distributing the money without tax penalty to the account holder's spouse or dependents. Although you can use this money to sort out your finances, it is always better to roll it over to IRA. Better to leave your retirement money untouched during a gray divorce.

2.Sacrificing Some Retirement Dreams: Getting a divorce in your later career makes you rethink your retirement plans. It may mean that you have to sacrifice some retirement dreams as your earning dips. But even though a divorce cuts into your life savings, some people find that it's a fair trade – to spend your retired years peacefully. Solution: For those who have been married for ten years and do not remarry before the age of sixty are entitled to claim Social Security Spousal Benefits off their former spouse's work record. This money adds another layer of financial security.

3.Divorce settlement Negotiations: Divorce settlement negotiations are a critical aspect of a gray divorce. There is no right or wrong method to divide the retirement fund among two feuding spouses. Experts advise non-earning spouses against taking the house in settlement over retirement funds. Real estate is not an income-producing asset, and the property's value may not increase as anticipated. Not to forget the costs of maintenance and upkeep. Solution: Both parties should hire their own team of experts who can get them the best settlement. Many women who have been non-earning spouses for decades may find it challenging to understand and manage personal finances at this stage. In such cases, for non-earning spouses, it is good to opt for money in a Roth IRA instead of settling for the house.

Divorce can be difficult and emotionally draining at any point in time in life, gray divorces more so. If you find yourself unhappy in your marriage, it is not advisable to jump to the decision of a divorce. Instead, take a step back and think about what you want to accomplish by ending your marriage. In some cases, it helps to take the couple's counseling or advice from marriage counselors. If you have to go through a gray divorce, plan your finances wisely and hire a reliable lawyer to guide you through the process.