Divorce comes with financial implications at any age, but a mid-life divorce can be even more complicated.
Most middle-aged couples have a home, retirement accounts, several vehicles, and investments. You may also have debt in the form of credit card bills, car loans, a mortgage, and potentially even student loans, for yourself or your grown children.
Mid-Life Divorce: 4 Things to Consider
If your finances are complicated, it’s likely your divorce will be as well. Consider the following to lessen the impact of your mid-life divorce on your long-term financial situation.
Consider Your Monthly Income
Divorce can wreak havoc on your finances in general, but for women that have relied on their spouse’s income, the damage can be much worse. A 2017 study found that U.S. women in their 60s that went through a divorce have a poverty rate of 27%, significantly higher than any other demographic in that age range (including widows).
Take the time to inventory your monthly income and personal expenses. Consider your most basic short-term needs, including:
- Housing costs, including utilities
- Personal care
- Health care
Above and beyond those short-term needs, you may want to determine your long-term goals.
- Do you plan to retire at 60? At 65?
- Will you continue to make contributions to investment or retirement accounts? If so, how much?
- Do you intend to increase your emergency accounts?
When you have the estimate of your monthly expenses, you’ll know exactly how much income you need and will be able to negotiate spousal support accordingly.
Consider Your Retirement Accounts and Assets
The division of retirement accounts and assets is a complicated one that requires special care to minimize tax implications. Private-sector retirement plans, such as a pension or 401(k) will require court approval through a Qualified Domestic Relations Order (QDRO) for the division of those assets.
If your marriage lasted ten years or more, then Social Security should be considered as well. If you remain unmarried, are age 62 or older, and your spouse is entitled to Social Security retirement or disability benefits, then you may be able to receive the greater of 50% of your spouse’s benefits or 100% of your own. This is not something that will be discussed, usually, in the divorce proceedings, but it is a financial issue that should be addressed when planning for your life after the divorce is over.
Each situation is different, so take the time to discuss your specific needs with a financial professional.
Consider Your Home
Your home comes with memories – raising children, hosting gatherings, and more – and it can also provide a feeling of security. When it comes to mid-life divorce, many spouses allow their emotions to cloud their judgment with regard to keeping the family home. With only one income, maintenance costs, property taxes, and the house payment can quickly exhaust your financial resources, so it’s essential to weigh the costs ahead of time. If you choose to sell, you’ll need to have a value on the spreadsheet of the house. You can either agree on a value, use comparable house sales (comps), use tax records for the county or get an appraisal done, which is the most accurate. When you know how much the home is worth, your divorce financial negotiations will be more accurate from the start.
Consider Your Investments and Additional Property
Property division laws vary from state to state, so you’ll need a lawyer on your team that knows the local laws. Texas is a community property state. Each county, and even each court, can have a different approach to how the estate is viewed in light of each family’s circumstances. A just and right division of the estate can mean different things with different family situations and different courts. It’s important to have an experienced family law attorney who knows your court and your judge.
Financial assets, including stocks, bonds, and cash, can often be divided straightforwardly. Complications tend to arise when stock options, real estate, vacation homes, and collectibles enter the scene and separate appraisals for each of those will likely be necessary. If you own a business, you’ll likely need to have that business valuated and it goes on the community spreadsheet as an asset.
Ideally, the goal is to eliminate joint ownership of all of the marital assets. Get independent valuations from industry professionals to ensure a fair value buyout and to lessen the likelihood of conflict between you and your ex.
Professional Assistance for Mid-Life Divorce
No matter what your financial situation, the process of divorce will impact you emotionally, socially, legally, and financially. Contact Divorce Strategies Group today, and we’ll help you clarify your options, create a plan for transitioning into the next phase of your life, and connect you with the resources you’ll need throughout the process. Protect your future – call us today.