Gray Divorce: A Guide to Managing Split Finances in Retirement
Maybe you’ve been waiting for this day for years, or maybe you’re shocked it’s happening. No matter where you fall on the spectrum, understanding how your finances are affected by your gray divorce can save you a great deal of worry and stress, particularly when you may already be feeling those things for other reasons.
Experiencing a gray divorce may not have been in your retirement plans, but if you’ve found yourself in the middle of one, you’re not alone. According to Pew Research Center, divorce rates for those 50 and older have more than doubled within the past 25 years.
What is a Gray Divorce?
A gray divorce, or silver divorce, is a divorce between two individuals 50 or older. According to a Census Bureau report from 2016, divorce among older adults is not a rare occurrence. Their data shows that almost 40 percent of those 65 to 74 years old get divorced, supporting Pew Research Center’s data around the increased divorce rates among those 50 and older.
About 36% of adults 50 and older are getting divorced and people 65 and older constitute the only age group with an increasing divorce rate, according to a 2022 study in the Journals of Gerontology.
Gray Divorce Reasons
There are a multitude of reasons why people decide to get divorced later in life. Some of these reasons are the same for younger couples deciding to split — infidelity, lack of intimacy or unrealistic expectations, to name a few. However, many gray divorces have more unique causes.
For example, those who have been divorced once in their lifetime are more likely to get divorced for a second or third time. Data from a divorce law firm, Gardner and Lewis, shows that those who have been divorced and remarry are 60 percent more likely to get divorced a second time. Older adults, in particular, have a higher chance of being divorced at least once before, compared to those in their younger years.
- Financial independence
- Lifestyle changes during retirement
- Financial struggles
- Female autonomy and independence
- Empty nest syndrome
- Falling out of love
While one overarching reason may have been a large contributor to your gray divorce, chances are there were multiple things that lead to the end of your marriage. You may not feel like you can save your relationship now, but there are things you can do to make sure you make it through the divorce process without going into debt.
Methods for Divorcing After 50
No matter the reasons for your gray divorce, you’ll need to determine the best way to legally separate from your spouse. When doing so, consider the financial impact of different methods as well as the amount of time it may take to finalize the separation.
Legalizing your divorce can happen in several different ways. Read through the list below to get an idea of what will be best for your situation.
With the help of a hired mediator, you settle the issues of the divorce peacefully and without the need for court.
Those who would like a peaceful divorce but are having difficulty coming to a fair agreement.
Also sometimes referred to as a “DIY divorce,” in which you and your ex-spouse-to-be determine the minute details of the separation on your own.
Those who wish to have a peaceful separation that doesn’t involve third parties or expensive representatives.
A judge will make the final decisions if you and your spouse can’t come to an agreement on the issues of separation.
Those who are at odds with each other and need a third party to step in and make the decisions.
If you were to file for divorce and your spouse refused to respond to the court summons, you may be granted a default divorce.
Those who aren’t able to get in contact with their significant other.
Similar to a trial held in court, except with an arbitrator — typically with a law degree of some kind — who hears both party’s stories instead of a judge. They then make a final decision on separation issues.
Those who want to keep their divorce more informal, flexible and affordable but need a third party to step in to make certain decisions.
Financial Impacts of a Gray Divorce
When considering how much your divorce at 50 (or older) will cost, there’s more to account for than just the legal items. In fact, when deciding to get a gray divorce, you’ll also need to consider more obscure financial elements you may not have yet thought about, such as paying for long-term care or purchasing new insurance policies.
- Financial accounts
- Real estate
- Long-term care
- Retirement income
- Cost of the divorce
- Social Security benefits
According to data from the Federal Reserve, families with a head of the household over 55 had an average of roughly $1 million in assets in 2019. Trying to finalize your gray divorce too quickly may leave you without your fair share of those assets, so it’s worth taking the time to sort through the financial side of your separation, no matter how difficult.
While dividing your accumulated property and accounts, it’s also wise to consider how you plan to recover from any setbacks or hurdles you may now face.
Depending on how you initially set up certain retirement accounts, it may be fairly simple to separate them. For example, if you have individual retirement accounts (IRAs) that you both contributed to singularly but not collectively, they would be considered individual property. Thus, “separating” them may be as easy as contacting your brokerage to change your beneficiaries once you’re divorced.
This might be the case if you’ve been through a divorce once before, have your own retirement account and decided to keep yours separate from your spouse’s upon your re-marriage.
Many IRAs are considered marital property. As such, you will have to determine how the money will be divided and where each person’s portion will go. This is often included in the divorce settlement.
For 401(k) and 403(b) accounts, the spouse whose name is not on the account may be entitled to some of the funds. To receive your portion of the contributions made, you’ll need to contact the plan administrator and will likely be required to file a Qualified Domestic Relations Order (QDRO).
You should also consider how you will split the funds in regular checking, savings and other accounts you may have. If it’s not an amicable split and you’re worried about your spouse withdrawing or using the funds during the separation process, contact your financial institutions to freeze the accounts until final decisions have been made.
- File a QDRO for access to 401(k) or 403(b) funds.
- Freeze bank accounts until a final agreement has been made on who will receive what funds.
- Remove previously authorized users from credit cards.
- Open a separate bank account if you don’t already have one or remove authorized users from your personal accounts.
Real estate can be tricky to split because it often isn’t as liquid as a bank account balance. To set things in motion, make a list of all real estate properties the two of you own or pay for. This can include your primary residence, rental properties, vacation homes or timeshares.
Next, you’ll want to determine how much each is worth. You can do this by hiring a formal appraiser, or by looking online at resources such as Zillow or Realtor.com. How you go about this process depends on how accurate you want your evaluations to be.
After determining the value of each property, calculate any associated loans each may have. You’ll then subtract the loans from the overall property value to determine how much equity you have in all your properties.
You can also go through this process with each individual property if it makes it easier to determine a fair split. From here, you can decide to sell the properties and split the proceeds, or, if it’s fair to both parties, you can decide to each keep certain properties.
- Purchase an income-generating property with the funds from your previous home.
- Consider renting out empty rooms, the garage or shed to make some extra money on the side.
When it comes to splitting an annuity when getting divorced, you have a few options to consider. You can either withdraw the funds, transfer the funds to each person’s IRA, transfer ownership or start a new contract with the divided funds.
Whichever method you decide is best, be mindful that each state has its own laws when dividing an annuity. Specific regulations by the issuing company can also be found in the original contract.
Similar to a retirement account, if one person owned an annuity before the marriage and neither party contributed to it during the marriage, it will likely be considered individual property rather than marital property. If this is the case, the funds don’t need to be split.
- Research state laws and regulations so you understand potential implications with dividing your annuity.
- Consider future taxation on withdrawn annuity funds.
- Before agreeing to transfer ownership of an annuity product to one person, make sure its cash value is equal to the value of whatever is given to the other party in its place.
Long Term Care
Long-term care is one thing you shouldn’t go without planning for. The cost of this type of care can range anywhere from $50,000 to $100,000 per year. Making sure you have enough retirement funds tucked away for later on is the first step to making sure you’ll be well taken care of when you need it most.
However, if you’ve gone through your retirement funds and determined that long-term care may not be in the cards for you financially, there are other resources available to help. Planning for them now may lower your overall costs, so it shouldn’t be put off too long post-divorce.
- Personal funds
- Long-term care insurance
- Regular health insurance (most likely Medicare)
- Life insurance policies with an accelerated death benefit
- Previously purchased annuities
- Reverse mortgages
- Social Security income
- Program of All-Inclusive Care for the Elderly (PACE)
There are plenty of ways to pay for long-term care, but many require a little forethought. For example, most life insurance policies get more expensive as you age. Although you’re now over 50, you may still be able to secure a health insurance policy that can help pay for care if you’re currently in good health.
- Don’t delay making a plan for your long-term care.
- Consider what resources can help you pay for this care.
- Write down your wishes for the type of long-term care you desire as well as how you plan to pay for it so your loved ones will know when the time comes.
Getting a divorce after 50 can take up a lot of time and energy. From dealing with possible third parties to filing paperwork, it can consume a good portion of your time. Dealing with new insurance policies may be the last thing on your mind, but if it’s not taken care of, you could potentially lose a lot of money in the long run.
Your health insurance is a prime example of this. If you were on your previous spouse’s employer-sponsored health insurance plan, you’ll need to consider what health insurance to switch to. If you’re 65 or older, you’re eligible for Medicare. However, you only have eight months to enroll after losing your previous health coverage. Otherwise, you’ll incur late fees.
You should also consider your dental and vision insurance. If you’re still employed and have coverage through your employer, you’ll want to find out when you can enroll in the plans as soon as possible.
If you have joint health, dental or vision insurance with your ex-spouse, you should call your insurance carriers to have your previous spouse removed from the policies or to have the policies canceled. This may save you money on premiums — money that can go toward paying for other things during retirement.
- Get quotes from a few different insurance providers.
- If you’re over 65 and are no longer working, sign up for Medicare within eight months to avoid paying late enrollment penalties.
Now that you’re divorced, where will your everyday income come from? Continued work during your retirement years is one way to earn some money. This can include full-time work, part-time work, freelancing, gig economy employment or side hustles.
According to the U.S. Census Bureau, the median average retirement income is roughly $47,000. Social Security benefits alone won’t total out to this much per year, so it’s important to have other income streams to supplement whatever benefits you do receive.
- Sell your art
- Invest in real estate
- Teach English
- Become a life coach
- Write (and sell) a book
- Become a tour guide
- Pet sit
- Create an online course
- Flip furniture
- Rent your space
- Start a business
- Create a monthly post-divorce budget.
- Set payment reminders or initiate automatic withdrawals for recurring bills.
- Invest your money and find passive income opportunities (like rental income).
Financing Your Divorce
Depending on the method you decide to use to get divorced, it can be costly. You may be responsible for paying fees for court filings, mediation, property appraisals, government recordings, your attorney or other things.
To finance your divorce, you may consider withdrawing from an individual annuity or retirement account that is solely in your name. You could also consider getting a personal loan from a bank or credit union.
- Stick to a budget to avoid overspending on non-essentials.
- If you decide to get a personal loan, make your payments on time to prevent your credit score from declining — which can then affect your ability to purchase a new home or car if your spouse received them as part of your divorce settlement.
Social Security Benefits
Once divorced, you may still be eligible to receive Social Security benefits based on your ex-spouse’s record. This is true if you meet the following criteria outlined by the Social Security Administration:
- You were married for at least 10 years.
- You didn’t remarry.
- You’re at least 62 years old.
- The benefit you would receive based on your own work record is less than what you would receive based on your ex-spouse’s record.
- Your ex-spouse is eligible to receive Social Security benefits.
If you are entitled to benefits based on your ex-spouse’s record, you can only receive up to half of your ex-spouse’s benefit amount.
- If you are 62 or older, you can apply for Social Security benefits by filling out an online application or by calling 1-800-772-1213 (TTY 1-800-325-0778).
Life After Gray Divorce
Getting a divorce at any age can leave you feeling sad and lonely. This can be especially true for the spouse who didn’t initiate the divorce. However, finding ways to maintain positivity in your life can lead to greater satisfaction in your decisions, according to a Max Planck Institute for Research on Collective Goods study. This, in turn, can help you find a new direction in this next phase of your life.
To find joy again or move through the stages of grief easier, it can be helpful to meet with a therapist to get unspoken feelings and thoughts out in the open. You can also try selling or giving away items you won’t need as a single person, such as extra dishes, to help declutter your space and mind.
Though this time may be filled with uncertainty and fear, it can also be a time of great growth. You now have the freedom to live life on your own terms. You can live wherever you decide, work however much you need and travel whenever you want and your budget allows. However, if you choose to only focus on the negatives, you won’t get any closer to living the life you always wanted.
Helpful Resources During a Gray Divorce
As you move into the next phase of life after your gray divorce, look through the resources below for additional information and assistance.
- USA.gov Family Legal Issues
- U.S. Department of Health and Human Services Mediation Guide
- Meals on Wheels
- USA.gov Moving Guide
- Social Security Benefits
- National Council on Aging
Getting a gray divorce can be an emotionally draining process. Learning how to manage your finances on your own and prepare for the future can also seem daunting when you’ve already been through so much.
If sure exactly how you should go about splitting your assets, purchasing a new annuity product or finding the right insurance policy for you, talk with the appropriate professionals. Recovering from a divorce can take time, but having others there to help you through the process can get you back on your feet quicker.
7 Cited Research Articles
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- Brown, S.L. and Lin, I. (2022, September). The Graying of Divorce: A Half Century of Change. Retrieved from https://pubmed.ncbi.nlm.nih.gov/35385579/
- Mayol-Garcia, Y., Gurrentz, B., Kreider, R. (2021, April). Number, Timing, and Duration of Marriages and Divorces: 2016. Retrieved from https://www.census.gov/content/dam/Census/library/publications/2021/demo/p70-167.pdf
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