I’m a Finance Expert: 5 Tips To Handle the Financial Fallout of a ‘Gray Divorce’
Written by
Nicole B. Simpson, CFP
Edited by
Susan Kim
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Divorce is never easy, and separation can have severe financial consequences coupled with the emotional turmoil that accompanies the reality of moving forward as a single adult. It can be even more devastating when the divorce occurs after one turns 50 years old, something the AARP has termed a “gray divorce.” In addition, adjusting to being in partnership with someone to face the reality of living your senior years independently, can be a scary proposition.
The decision to separate brings about significant changes and adjustments that range from having to move to living on a single salary to creating a new social community. Some individuals, particularly women, may have to face the reality that they must get jobs after being out of the workplace for years.
However, uncertain the future may feel, some considerations will help guide you during your twilight years as a single individual.
Meet With a Financial Professional Before the Divorce Is Finalized
You’re entering into a new chapter of life, so you need to return to the basics, which is getting educated on your finances. Creating a new budget with a single income will help gauge your new standard of living.
A great financial planner will help you recalculate your projected retirement goals and adjust your savings strategy. That person can help you determine whether any financial vulnerabilities need to be addressed immediately and will add value to creating your new financial road map. Unfortunately, it may include delaying retirement, getting a new job and adjusting your lifestyle a bit.
Update Your Beneficiaries
Building with someone and then having to forge ahead alone can affect your legacy or overall estate plan. Take the time to update the beneficiaries on life insurance policies, retirement plans, and other substitute items. This is critical.
Most retirement plans require a spouse to sign documents when not listed as a beneficiary. That means the spouse is most likely listed until it is changed. Don’t allow your intended beneficiaries to find out too late that they are not receiving an inheritance.
Complete an Estate Plan
When someone is married, the spouse generally has first rights of entitlement, even without a will, healthcare proxy or durable power of attorney. When a senior is advancing in age alone, it is important to record the physical and financial objectives of the single senior. Make sure you inform someone that you have placed these items in writing so your personal care is in written order.
One of the biggest challenges isn’t if you die. A major obstacle is if you fall ill or have a catastrophic event and live.
Look Ahead, Not Behind
Sometimes, focusing on what you used to do, how you used to live and the money you used to have can cause you to adopt poor money habits trying to sustain a lifestyle that your current budget cannot handle. This can cause you to fall into debt rapidly.
The recovery time is limited for people advanced in age and it will detrimentally impact you at the most inopportune time when you are incapable of working.
Consider If Entrepreneurial Endeavors Are Beneficial for You
Consider whether you have a special gift or skillset that can be monetized. Becoming an entrepreneur or independent contractor can offer tax incentives during your peak earning years. The more revenue you can generate, the easier it becomes to secure your financial future. In addition, it can provide you with more revenue when you ultimately retire from your primary vocation.
If you desire to remain single or even if you are open to a new love in the future, the steps to secure yourself financially will benefit you as you live during your golden years.
Editor’s note: Dr. Nicole B. Simpson is a dedicated certified financial planner board member of the CFP Board Center for Financial Planning Diversity Advisory Group and Chair of the Generation X Community Association.
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