Divorce is a financially tolling experience regardless of at which age a couple chooses to go through it. However, recent findings suggest that gray divorce — or the phenomenon of splitting up after age 50 — may be particularly devastating to one’s financial health, far more so than if he or she were to divorce at a younger age. Bloomberg shares findings that quantify the damage.
According to the report, if a person plans to go through a divorce after the age of 50, he or she should expect his or her wealth to drop by about 50%. This rate of financial decline seems to be the norm among the 20,000 divorced Americans who responded to the survey. Though this may not come as a shock to many — after all, parties expect to divide their wealth 50/50 in a divorce — what parties do not expect is the drop in income and standard of living.
Researchers found that for divorced women over 50 years of age, the standard of living decreases by an average rate of 45%. This is the case even for women who do not have children at home. That rate is nearly double the decline previous studies on younger divorced women found.
For men, the decline in standard of living is not so drastic. Divorced men over the age of 50 can expect their standard of living to drop by about 21%. Younger divorced men experience almost no difference in standard of living post-divorce.
What is even more alarming is the fact that these older individuals do not seem to bounce back from the financial devastation, especially women. A 10-year follow-up study found that U.S. women over the age of 63 who had gone through a gray divorce have a poverty rate of 27%. This is a higher rate than any other age group, and nine times the rate of married couples.
Though the statistics are discouraging, there are steps individuals can take to avoid financial devastation post-gray divorce. U.S. News Money suggests that women who have never been financially independent take a financial management class or work with an advisor to craft a feasible budget. Non-working spouses should also hire their own financial professionals to review settlement offers and provide feedback. If a non-working spouse received his or her insurance through the other spouse’s employer, the former spouse should have a plan regarding how to replace coverage.
Additionally, divorcing parties should think twice about taking the family home instead of splitting retirement funds. Any asset that produces income is far more valuable than one that may or may not appreciate in value over time, and that requires considerable upkeep.