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?
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What is gray divorce?
Kathryn’s situation is far from unique. Gray 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.
Gray divorce rates in the U.S. have risen over time. A 2022 study found that gray divorces increased moderately between 1970 and 1990 before doubling by 2010. Rates then stagnated for those aged 50-64, but continued to grow for the 65-plus crowd. In 2019, 36% of people getting divorced were aged 50 and up.
So, what’s behind this trend?
For one thing, it’s more socially acceptable these days to get a divorce than it was back in the 1970s. At the same time, people are living longer. In 1970, life expectancy in the U.S. was 70.8 years, while presently it’s 78.4 years, according to the Centers for Disease Control and Prevention..
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 gray 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 gray 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.
A qualified domestic relations order, or QDRO, is “a judgment, decree or order for a retirement plan to pay child support, alimony or marital property rights to a spouse, former spouse, child or other dependent of a participant,” according to the Internal Revenue Service. A spouse or former spouse can roll over tax-free “all or part of a distribution from a qualified retirement plan that he or she received under a QDRO.”
Kathryn may be eligible for alimony or spousal maintenance, though the amount and duration will vary depending on state laws.
Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
She’ll also want to look into Social Security. If you’re divorced, you either get benefits based on your work record or your ex’s work record, whichever is higher — so long as you were married for more than 10 years before the divorce and haven’t remarried.
Kathryn doesn’t have to wait until her ex claims his benefit to start receiving hers. But if she claims it before reaching her full retirement age (at age 67), she’ll receive a permanently reduced benefit like anyone else.
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 state.
It could be worth consulting a financial advisor to model various scenarios and come up with a post-divorce budget and new retirement plan.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
