Published August 27, 2024 • 4 Min Read
TLDR
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Grey divorce, which refers to divorce after the age of 50, is becoming more common.
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Divorce during your golden years comes with some special financial considerations and may require a review of your retirement plan.
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Women are especially impacted by grey divorce, and often face a reduction in their income.
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Connecting with a financial advisor can help mitigate the financial effects of a divorce and ensure you’re on solid financial ground.
Grey divorce, a term used to describe divorce after the age of 50, has become more common for Canadians. The divorce rate for people in this age cohort increased by 26% between 1991 and 2006 and has since stabilized. Meanwhile, the average age of Canadians divorcing has been rising steadily for decades, reaching 46 in 2020, compared to 32 in 1980.
While dissolving a marriage at any time is difficult, doing so as you approach retirement—or if you’re already in retirement—presents some unique challenges, especially regarding finances. Couples may be past the point of earning income, and determining how each can continue to fund their retirement is paramount. However, by gaining some expert guidance and understanding your options, you can navigate the finances of your divorce and mitigate the event’s impact on your financial life.
Financial considerations: assets and debts
While there’s a lot to sort out in a divorce, finances and money remain at the top of most people’s lists. For retirees, this discussion merits special consideration. You may have accumulated significant assets over your lives together, incurred debt, or both. In addition, most couples craft their retirement strategy to account for their life together.
As you approach the alternative, examine your joint assets and any financial obligations or debt to understand the big picture. Consider your current lifestyle, the associated expenses, and what you envision for your future. You will need to revisit your retirement plan to account for the division of assets and create new income strategies and budgets for each person. For instance, each spouse must consider their housing, transportation, travel, medical expenses and more.
In addition to dividing assets, retired divorcees should also review and discuss insurance, pensions, and estate plans to account for the marital change.
Rebuilding your financial future as a divorced retiree
Once the divorce is finalized, retirees face the prospect of reimagining their financial future. This effort might involve downsizing housing or moving locales, supplementing retirement income, or dramatically reducing expenses. Creativity and flexibility can help you find solutions to potential financial issues as you embark on a new future. And at this point—and all points—knowledge is power
You want to understand your retirement plan and what’s required to meet your objectives. For example, if your current housing has become too expensive to sustain, you might consider moving closer to family, exploring a more affordable neighborhood, or investigating community living scenarios. If finding additional income is essential, you could look for part-time employment or tap back into an aspect of your career.
Impact of grey divorce on women and their income
Divorce typically has a more significant financial impact on women, and this remains true for women who split from their spouses in retirement. Studies reveal that women’s income drops between 23% and 40% after a divorce. For women who are over 50, their standard of living decreased by 45% following a divorce, while it dropped by only 21% for men.
Re-partnering tends to help improve people’s financial situations, but older women are also less likely to re-marry than their male counterparts. These statistics highlight why it’s crucial for women—in marriages and those pursuing divorce—to understand their household finances, including the family budget, cost of housing, any debt, and assets held in savings and investment vehicles.
For women, prioritizing financial literacy and engaging in financial decision-making ensures you’re well-equipped to navigate personal finances if you divorce or lose a spouse. In addition, consider whether each spouse has access to individual and shared accounts. That way, if the relationship takes a turn, no one is financially cut off when they need access to funds.
Seek professional financial advice and guidance
Untangling a marriage’s worth of finances is no small feat. But you don’t have to go at it alone. In addition to working with your attorney or mediator, consider connecting with a financial advisor. Some advisors even specialize in divorce guidance and can provide recommendations for asset division, retirement strategies, tax implications, and more.
Going through a divorce does come with challenges. But by being aware of the financial implications and working through them with a professional, you can ensure you’re on solid footing as you begin your next chapter.
If you need guidance figuring out your housing costs post-divorce, our housing affordability calculator can help.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
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