Divorce can have a devastating effect on both parties' standard of living and finances.
We have previously blogged about the sacrifices divorcing spouses make when they cannot afford to support two separate households at the same standard of living they enjoyed during marriage.
However, in Del Mar, the "gray divorce trend" is resulting in another sacrifice divorcing couples make - retirement.
From 1990 to 2010, the number of divorces involving spouses over 50 years old "gray divorcés" doubled. Experts say that one of the causes for the increase in later-in-life divorces is longer life spans. Just like a divorce between spouses in their 20's and 30's will affect the current standard of living for both parties, a divorce past 50 will affect retirement lifestyles. If a couple divorces when the spouses are between 20 and 40 years old, there is plenty of time before retirement for both spouses to re-build any divided retirement funds. However, gray divorcés will experience the following financial roadblocks:
First, the accumulated retirement savings between the parties is usually divided in half upon divorce. When parties divorce, all property acquired during marriage is divided equally. Most, if not all, of a couple's retirement fund is usually acquired during marriage. Thus, each spouse will only end up with one-half of what they planned on retiring on with his or her spouse.
Second, funding two separate retirements can cost between 30% and 50% more than funding one. Post divorce, the parties will take separate vacations, take twice as many trips to visit their children and grandchildren, use two separate cars instead of one, live in two separate houses, etc. In addition, if one former spouse becomes ill, the other will not be there to care for him or her. Therefore, post divorce, a spouse may have to use significant retirement funds to pay for medical care.
Financial planners have a few suggestions to help gray divorcés get through divorce and retirement past 50. They suggest hiring a financial adviser simultaneously with hiring a divorce lawyer. Additionally, they advise against supporting adult children when it is not feasible. Often around the age of 50, a gray divorcé will have a child who is getting married and expecting them to shell out $30,000 for a wedding. These types of purchases are not advisable. Finally, financial advisers suggest reducing spending by living in a smaller home, traveling less and eating out less.