'Gray Divorces' Can Upend Your Retirement Plans

Ending a marriage later in life with a gray divorce creates financial challenges for those involved.

An older couple looking at paperwork.
(Image credit: Getty Images)

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, says Panitz, who hosts the nationally syndicated radio show, “The Divorce Hour with Illyssa Panitz,” she told her husband she wanted to split up. And she realized her ignorance about their money situation “was my biggest mistake and biggest downfall. I had the rug pulled out from under me.”

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Divorce is almost always a major upheaval — financially, socially, emotionally. But it’s different later in life. Couples have typically been together longer, so their lives — including their assets — are more intertwined. There’s also less time to recoup any financial losses due to divorce. And if there is a non-working spouse, he or she (but usually she) may have to venture back into the workforce after many years away. Well, at least the kids are usually grown and gone. 

Record Divorces Among Seniors 

Between 1990 and 2017, the divorce rate doubled for older people. Now, one in four divorces are among people over 50.

There are a number of reasons for the increase in so-called gray divorces. Culturally, divorces, and later-in-life divorces, are more accepted than ever. People live longer — men’s average longevity in the U.S. is 73, women 79 years old — so new relationships and careers past 50 are more and more common. And it’s much easier to walk out of a marriage and home when white-collar jobs can be worked remotely from anywhere with an internet connection. 

“People say, ‘I don’t want to live the rest of my life like this,,” says Sarah Jacobs, a family law and matrimonial lawyer Morristown, N.J. “‘I have time to make a change and still have quality of life and portability of my personal self and my work self. I can move to Florida where there's no state income tax and still have the job that I had in New York on a New York salary.’”

Have a Handle on Your Finances 

Understanding your money situation is the first big step in divorce proceedings. States typically require a financial affidavit or statement of net worth. In California, for instance, both parties must fill out multiple forms and include tax returns, pay stubs, documents showing what’s owned and what’s owed and other records. In New York, there’s a 22-page document that delves into the minutia of spending, including not just big-ticket items such as mortgages or rent and utilities, but also monthly clothing costs (including dry-cleaning) and children’s extra-curricular activities, down to the cost of their birthday parties.

The requirement to answer that statement of net worth made Panitz realize how much she didn’t know about her family’s finances. She could answer how much she and her husband were making but floundered over the specifics of their mortgage, how much the car leases were or the balance on their credit card. 

The real surprise, however, was when she found out there was a home equity line of credit on the house that she wasn’t aware of — meaning there was no equity in their million-dollar plus house.

“My credit went from fabulous to I-think-the-janitors-swept-it-up,” says Panitz, whose divorce was finalized in December 2020. ”People, especially women, have to know they have to pay attention to their finances in their marriage whether there’s a divorce or not. Anything can happen.”

Women Take the Biggest Hits 

Research shows people older than 50 who divorce have a decline in their standard of living, but it’s more drastic for women; their standard of living drops by 45% compared with men’s decline of 21%. 

Older people seeking divorce are usually much more concerned about retirement accounts and pensions than younger divorcers. The processes of dividing IRAs, 401(k)s or pensions differ and can be complicated. It’s important to know about something called a qualified domestic relations order (QDRO), a judgment, decree or order that allows assets in a 401(k) or pension plan to be divided between parties without tax consequences or penalties.

IRAs are not covered by QDROs, but dividing them is usually easier. If the IRA was opened during the marriage, it’s considered a marital asset and will be divided like other assets. If it was opened before the marriage, the funds contributed during the marriage may be considered a marital asset. 

Social Security also comes into play in older divorces; if you meet specific criteria, you can receive Social Security from an ex-spouse. To qualify, your marriage must have lasted at least 10 years; you must also be unmarried and at least 62 years old. The Social Security Administration lays out all the provisions on its website.

Time Is Short 

But it’s key to remember that those over 50 have less time to recover a hit to their investments than younger people, says Steph Wagner, director of women and wealth at Northern Trust Wealth Management. “What I’m hearing with the couples we talk to is this fear that ‘I’ve accumulated all this wealth, and now it’s going to be slashed in half and I have to rebuild, and I don’t have time.’” 

There is good news for those caught in such a bind: Last year Congress passed the Secure Act 2.0, which has made it easier to build up all types of retirement savings plans at a later age. Among the pertinent provisions: The age when you must take the first required minimum distribution from your pretax accounts has been bumped from 72 years old to 73 — increasing to 75 in 2033 — and the amount of “catch-up” contributions those over 60 can deposit in their retirement plans has increased.

But you have to have the money to put in those retirement accounts, and, says Wagner, that means planning for a new lifestyle. She urges those contemplating divorce when older to strive to live below your means to maximize retirement savings. 

“If you're not properly planning, and you're living right at your break-even, you're not really doing your part to rebuild your net worth,” she warns.

Moving On… and Out 

Sound financial planning may mean giving up the beloved family home, something divorce attorneys say is often a sticking point for one or both parties.

“From an emotional standpoint, many clients want to keep the house, but in many cases that can be a financial mistake,” says Raleigh, N.C., lawyer Jaime Davis. “The home can become a money pit in terms of upkeep, such as property taxes, new roof, new HVAC, for example, and the spouse may have to end up selling the house after other assets have been depleted.” Davis also hosts a podcast, “A Year and a Day: Divorce Without Destruction.”

While it’s important to focus on financial stability during a divorce, the same is true with the psychological impact. Divorcing after 20, 30 or 40 years of marriage can be a big blow to one’s identity and sometimes clients lean on their lawyers as armchair therapists, says New Jersey family law attorney Jamie Berger. “I can do my part but if you’re paying me my hourly rate, you’re overpaying me for something I’m not qualified to do. If the client is open to it, I might suggest a therapist or support group.”

Northern Trust’s Wagner points out that it’s important to look at the positives, not just the negatives of moving out and moving on. “When the kids are gone, and you’re in your fifties and sixties, it can be incredibly liberating to start over,” she says. “How you approach it is the key to your success.”

Lynne, 67, of Corona, Calif., who asked to be identified only by her middle name to protect her privacy, divorced about 20 years ago, when her children were out of the house. She had not been happy in her marriage for quite a while, but wanted to wait until her children were done with college to ensure her now ex-husband supported their higher education.

The divorcing couple sold their house and split all the assets, and Lynne made a decision that would be tough for many at that age — she moved back in with her parents, who lived relatively close by, for a year. And she went back to school to train for a new job as an aesthetician. 

For Lynne, the mindset may depend to some degree on who initiated the divorce.

“Even though it was very emotional, and very hard on the kids even though they were older, I was excited to be in a new career and thrilled to be out of a horrible relationship,” she says. “You have to stop looking in the rear-view mirror.”

Lessons Learned

  • Fully understand your finances including all investments, savings and debts. That can also include credit card points and frequent flier miles.
  • Make sure you click with your divorce lawyer if using one — and that she is looking out for your best interests. Beware of any lawyer who says you can “win” without pausing to understand your circumstances or motivations.
  • Assemble a team: lawyers, financial planners, accountants. But remember, they’re not your friends or therapists. Look for psychological professionals or support groups to give you the emotional support you need. The National Association of Divorce Professionals is a good resource for legal, financial, real estate and mental health experts in the divorce field. 
  • Don’t get fixated on holding onto your family house. Figure out the full costs of staying there including taxes and upkeep and if you will still be able to make it financially if your property value drops. 
  • Don’t forget about health insurance if you are divorcing before Medicare kicks in at age 65. Understand your options and the costs.

Note: This item first appeared in Kiplinger’s Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice(opens in new tab) that’s right on the money.

Contributing Writer, Kiplinger's Personal Finance

Alina Tugend is a long-time journalist who has worked in Southern California, Rhode Island, Washington, D.C., London and New York. From 2005 to 2015, she wrote the biweekly Shortcuts column for The New York Times business section, which received the Best in Business Award for personal finance by the Society of American Business Editors and Writers. Her work has appeared in numerous publications, including The Times, The Atlantic, O, the Oprah Magazine, Family Circle and Inc. magazine. In 2011, Riverhead published Tugend's first book, Better by Mistake: The Unexpected Benefits of Being Wrong.