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Gray divorce can derail retirement. Here's how advisors can help

Gray divorce poses growing threat to retirement | Financial Planning.com

By   Nathan PlaceApril 17, 2024, 9:00 a.m. EDT4 Min Read

The divorce rate for Americans over 50 has risen dramatically in recent decades.

Last week, 72-year-old “Golden Bachelor” star Gerry Turner announced that he and Theresa Nist, 70, are getting divorced — just three months after their TV wedding.

Depending on your level of faith in reality television, this news could be heartbreaking or yawn-inducing. Either way, it illustrates a growing trend: Americans are getting divorced later and later in life — and this poses a growing threat to retirement savings.

Over the past few decades, gray divorces have skyrocketed. Since 1990, the divorce rate among Americans over age 50 has more than doubled, according to a study published in The Journals of Gerontology. Since 2010, the trend has gotten even grayer: Only the divorce rate for those aged 65 and older has been rising.

And there’s a high cost to these breakups: After a late-in-life divorce, seniors experience roughly a 50% drop in their wealth, according to researchers at the National Library of Medicine. The results are especially harsh for women: While men suffer a 21% decline in their standard of living, for women it’s 45%.

For Americans on the verge of retiring, this can derail a lifetime of savings.

“It’s almost like you’re starting over, but with less time,” said Travis Anderson, a managing member at TBH Advisors in Franklin, Tennessee. “That’s the feeling that exists right out of the gate: ‘Man, I’m starting all over, but I have less time to get to what I had envisioned.'”

Anderson is currently working with three clients over age 50 who have recently filed for divorce. And he’s far from alone — many wealth managers have noticed a surge in the number of older clients who are parting ways with their spouses.

“I’ve seen a tsunami of late-life divorces during the last five years,” said Lili Vasileff, a certified divorce financial analyst (CDFA) at Wealth Protection Management in Greenwich, Connecticut.

How can advisors help clients in this predicament? The first step, Anderson said, is to draw up their options — literally.

“Give them a road map to how they can get there,” he said. “It’s a good visual technique to say, ‘Here’s where we are … and here are your goals. You’re either going to have to spend less, you’re going to have to save more, you’re going to have to take more risks or you’re going have to work longer.'”

The prospect of working longer — or returning to work — can be a shock for some seniors. Anderson said one of his clients had been out of the workforce for 20 years, but because of her divorce will need a job to make ends meet. Part of Anderson’s job has been to coach her as she looks for work — and build up her confidence.

“Going back to work — there’s a lot of anxiety around that,” he said. “We couldn’t stress enough that … ‘Your work ethic is very attractive in today’s workforce. Don’t ever underestimate your worth just because you’ve been out of the market.'”

Another way planners can help is by discussing how the client is splitting up their assets — before the divorce is final. Sarah Avila, a CDFA at VLP Financial Advisors in Vienna, Virginia, says this timing is crucial.

“The best way an advisor can help is by providing advice throughout the divorce process, not waiting until after the divorce is over,” Avila said. “An advisor can help a client understand the longer-term financial consequences of dividing assets a certain way.”

One important example of this is housing.

“Some clients prefer to keep the marital home, but this might mean they have to pay the spouse half of the home equity,” Avila said. “The financial repercussions may cause a shortfall in cash flow, as well as prevent the client from reaching longer-term goals. It’s best to discuss these things with the client before they finalize the marriage settlement agreement.”

Aside from this, there are a myriad of financial details to take care of — making a good wealth manager more useful than ever.

“An advisor can help the clients through the process by making adjustments to their retirement budget, helping the clients downsize their previously shared large expenses and updating the beneficiaries on their financial accounts,” said Ron Strobel, founder of Retire Sensibly in Meridian, Idaho. “It’s fairly common to see the ex-spouse still erroneously listed as the beneficiary years after the divorce.”

Anderson echoed Avila’s point about the timing of such advice: As with most financial counsel, the earlier, the better.

“It’s not uncommon for us to talk to people before divorces are finished,” Anderson said. “I know there are much more important things with kids and jobs and things like that, which will consume you more than your asset base. But it’s really important to make sure you don’t lose any more time and make up ground as fast as you can.”

Nathan Place

Retirement Reporter, Financial Planning

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