Divorce isn’t just a young person’s game. For some, love is fleeting and can evaporate quickly. In other cases, it’s a bond that can last for decades until it’s worn down or suddenly broken.
Kathryn, 57, finds herself single after nearly 30 years of marriage. Her ex was the breadwinner of the household, and she only has about $18,000 saved for her retirement.
Since she’s about 10 years from retiring, she’s wondering if she still has time to catch up. Will she have to delay her retirement — or even forgo it altogether?
What is grey divorce?
Kathryn’s situation is far from unique. Grey divorce, sometimes referred to as silver divorce, refers to couples over 50 choosing to get a divorce — often after a long marriage, and often after their kids have grown up and left the nest.
The average age for those seeking divorce in Canada has steadily risen overtime. In 1970, the average age for those filing for divorce was 38.8, which in 2020, has risen to 46.0, according to Statistics Canada. However, while the rate of grey divorces increased 26% from 1991 to 2006, the most recent data from StatCan shows this number having levelled out as recently as 2020 (the most current data available on this trend right now).
Couples sometimes stay together for the kids, so once they’re empty nesters they decide to part ways. Or maybe they’ve just been growing apart for years and their interests have changed as they’ve grown older.
Retirement itself could be a trigger if their financial goals aren’t in sync. But grey divorce can also have a major financial impact on a couple’s golden years, especially if one partner was the runaway breadwinner.
How to rebuild a nest egg after grey divorce
Divorce can take a financial toll, and those close to retirement age, or already retired, have less time to rebuild their depleted funds.
Rebuilding isn’t easy, but it’s possible. Kathryn has $18,000 in her retirement savings, but she should also consider other sources of potential retirement income. For example, part of her divorce agreement may include access to a portion of her ex’s retirement plans.
Kathryn may be eligible for alimony or spousal maintenance, though the amount and duration will vary depending on provincial laws.
She may also inquire about Canada Pension Plan credit splitting, which is mandatory in many provinces and territories, with the exception of British Columbia, Alberta, Saskatchewan and Quebec, and as long as she meets the following criteria, as outlined by Canada Life:
- A person has lived with their former common-law partner for at least 12 consecutive months
- They’ve lived apart for at least 12 consecutive months (except in the case where their former common-law partner died during this period, in which case they may still qualify)
- A person or their former common-law partner applies in writing and sends Service Canada the necessary documents within 48 months of the date you began living apart (unless your former common-law spouse is still alive and agrees in writing to waive the 48-month time limit)
Additionally, the provinces allow CPP credit splitting to be negotiated.
A decade isn’t a lot of time, but it’s still possible for Kathryn to build up her nest egg by cutting back on spending while increasing her savings rate — though that could require some sacrifices.
Kathryn will first want to make sure she’s not leaving any money on the table in the form of shared retirement assets. From there, she can come up with a new retirement plan and project how much extra she’ll need to meet her goals.
She’ll also want to build an emergency fund (to cover at least three to six months’ worth of expenses) and pay off any high-interest debt as quickly as possible.
To increase her savings rate, she may want to consider taking on extra hours at work or supplementing her income with gig work. But she may also want to rethink her retirement plans, such as delaying retirement, working part-time in retirement or reducing her living expenses by downsizing or moving to a cheaper city or province.
It could be worth consulting a financial advisor to model various scenarios and come up with a post-divorce budget and new retirement plan.
Sources
1. Statistics Canada: Steady rise in the average age at divorce
2. Statistics Canada: A fifty-year look at divorces in Canada, 1970 to 2020 (Mar 9, 2022)
3. Canada Life: How does CPP/QPP credit splitting work in divorce or separation? (Feb 1, 2024)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
