Published 19 April 2023
Ilyssa Panitz freely admits she gave up the financial reins when she got married.
“I did not keep an eye on the money, even though I got married later in life,” says Panitz, 54, who lives in Westchester County, N.Y. “My former spouse worked in accounting and I was taking care of the kids, and I figured ‘This is great’.”
Then, after 13 years of marriage, Panitz, who hosts the nationally syndicated radio show, “The Divorce Hour with Illyssa Panitz,” told her husband she wanted to split up. She realized her ignorance about their money situation “was my biggest mistake and biggest downfall. I had the rug pulled out from under me.”
Divorce: A Major Financial Upheaval
Divorce is almost always a major upheaval—financially, socially, and emotionally. However, for older adults, the emotional weight of divorce is compounded by tighter financial constraints. Couples have typically been together longer, making their lives—and assets—intrinsically linked. There’s also often less time to recover financially after a divorce, particularly for those who have been away from the workforce for many years.
The Rise of Gray Divorces
Between 1990 and 2017, the divorce rate doubled for older adults. Currently, one in four divorces are among individuals over 50.
This alarming trend is attributed to various cultural shifts; divorce at later stages in life has become more socially acceptable, and with increasing life expectancy—men live an average of 73 years, women 79—forming new relationships and embarking on new careers is more common than ever.
“People say, ‘I don’t want to live the rest of my life like this,’” explains Sarah Jacobs, a family law and matrimonial lawyer in Morristown, N.J. “I have time to make a change and still have quality of life.”
Understanding Your Finances
Being fully aware of your financial situation is crucial during divorce proceedings. States typically require a financial affidavit or statement of net worth. For instance, in California, multiple forms must be filled out, including tax returns and documents that reflect assets and debts. New York demands a 22-page document detailing specific personal spending habits.
The need to accurately disclose financial information made Panitz realize the gaps in her understanding of her family’s finances. While she knew about her and her husband’s income, she struggled with specifics regarding their mortgage, car leases, and credit card balances.
Moreover, when Panitz discovered an undisclosed home equity line of credit on their house, it became painfully clear that they had no equity in their million-dollar home.
“My credit went from fabulous to a complete disaster,” recalls Panitz, whose divorce was finalized in December 2020. She emphasizes that everyone, particularly women, should pay close attention to their finances, regardless of their marital status.
Impact on Women’s Finances
Research indicates that older adults who undergo divorce often experience a decline in their standard of living, with women facing an even sharper drop of 45%, compared to a 21% decline for men.
Older individuals contemplating divorce tend to focus significantly on retirement accounts and pensions. The division of assets such as IRAs and 401(k)s can be complicated. Understanding a qualified domestic relations order (QDRO) is essential, as it allows retirement accounts to be divided without tax penalties.
Furthermore, Social Security benefits can also play a crucial role; individuals can receive benefits from an ex-spouse if their marriage lasted at least ten years, provided they have not remarried and are over the age of 62.
Time Constraints
Individuals over 50 often have less time to recover financially compared to younger individuals. Steph Wagner, director of women and wealth at Northern Trust Wealth Management, notes a common fear among older divorcees about losing accumulated wealth and having to rebuild within a limited timeframe.
Fortunately, recent legislation, including the Secure Act 2.0, has made it easier to increase retirement savings at older ages through provisions that extend the age for starting required minimum distributions from retirement accounts.
Nonetheless, it’s crucial to effectively plan for a new lifestyle, ensuring that savings contributions can be made to take advantage of these favorable changes.
Letting Go of the Family Home
Effective financial planning may necessitate selling the cherished family home—a challenging decision for many. “From an emotional standpoint, clients often want to keep the house, but it can be a financial burden,” says Raleigh, N.C. attorney Jaime Davis.
While concentrating on financial stability is essential during divorce, it is equally important to address the psychological impacts. Divorce often triggers one to rethink their identity, and while attorneys may offer legal guidance, they are not equipped to provide emotional support.
Embracing New Opportunities
Despite the challenges, there are potential positives to moving on post-divorce. For many, a new chapter can bring a sense of freedom and the opportunity to redefine life goals and relationships. Lynne from California, who divorced 20 years ago, emphasizes the importance of moving forward, stating that even amid emotional turmoil, she felt excited to pursue a new career.
Essential Takeaways
- Thoroughly understand your financial landscape, including all investments, savings, and debts, as well as potential marital assets.
- Ensure a good rapport with your divorce attorney, who should prioritize your best interests.
- Assemble a professional team including lawyers, financial planners, and accountants, but seek emotional support separately.
- Be cautious with attachment to the family home; consider the total cost of ownership against potential financial stability.
- Consider health insurance options if divorcing pre-Medicare eligibility at age 65.
This overview highlights the critical financial considerations for older adults navigating the complexities of divorce, empowering them to make informed decisions for a stable financial future.
