2023 EP0520 | Financial Updates | Solo After 50: Navigating a "Grey Divorce

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Peter, good to see you. Today we're chatting about solo after 50, navigating a gray divorce. The divorce rate among people 15 over doubled between 1990 and 2010, and one quarter of people now getting divorced is over 50, which is incredible. And I was surprised to learn about a change in standard of living after divorce.

Women experienced a 45% drop in their standard of living, men a 21% reduction, according to the Journal of Sociology. So we're going to walk through a few key issues that you should consider if you're going through a divorce. But the first one, Peter, is to revisit your estate plan. Yeah, and backing up a little bit, revisit kind of your expectations for quality of life thereafter, right? Marriage is more than just the sum of one plus one equaling two. And a lot of times after divorce, there's some expectation that we can maintain the exact same lifestyle somehow when we've got a division of assets, a division of income. And that may or may not be realistic.

And more often than not, it's not. We've got to back up, kind of start from square one and refigure out our expectations for quality of life and what we can afford from a housing perspective, from an income perspective, from the extras and lifestyle. And yes, to your point in question, Aaron, we certainly need to revisit the estate plan, the legal documents, who gets our stuff if we are to pass away, who gets to make decisions on our behalf if we are not able to.

You don't want an ex that you no longer have that kind of loving, trusting relationship with being the recipient of things that you don't intend them to get or to be able to make decisions on your behalf that are life or death or financial. And a lot of times somehow this gets overlooked. It's one of the most important pieces of a foundation to all other financial planning on a regular basis. And certainly when there are big life changes such as a divorce, you need to revisit those plans, redo those documents, Aaron. Absolutely.

Next, you should examine your retirement and pension plans. Right. And a lot of times with a quadro qualified domestic relations order, things are during the divorce process kind of accounted for and there is a division of assets. Sometimes that division isn't exactly split everything right down the middle, right? Sometimes there is a tit for tat or sometimes there is an unequal distribution of assets.

It all depends on the individual specific situation. But these are assets as we are specifically talking about a gray divorce here where a lot of times it's now the rest of our life where we are relying on what we have during that period of time. And we need to make sure again that we understand and account for what those assets are and also get a very good understanding of what they can do for us into the future. Also make sure that you update your beneficiary designations. That sort of goes back to the last point of the estate plan loosely tied into the legal documents. This is actually more specific because oftentimes the beneficiary designation on retirement accounts bypasses and is prior to the probate process. So even what's documented in the will, the beneficiary designations on retirement accounts is going to supersede and be first. So yeah, definitely revisit those accounts, understanding what they're going to do for you, understanding who is listed as beneficiary on those retirement accounts.

And next would be determine how your Social Security benefits will be affected. Yeah, and as an individual, oftentimes they are not. Now there's some extenuating circumstances. Were you married 10 years?

Did you end up getting remarried at any point in time? But Social Security is designed as an old age and anti-poverty and disability insurance program. It literally is a government sponsored mandated insurance against those potentials. And the government actually in this one kind of had some foresight in understanding that this may be an event at some point in time. And as you stated, Aaron, unfortunately, much more common an event today than it was 20, 30 years ago.

And I would bet since 2010 that that rate has increased even further, especially with COVID, unfortunately. But Social Security, if you had a stay at home spouse, a homemaker who raised the children and then an income earning spouse, the stay at home spouse does have entitlement to Social Security. What if that income earning spouse decided at 60 years old that they no longer wanted to be part of the relationship. Right. And then there was a divorce. Social Security is designed to still provide some benefit for that stay at home spouse.

That was the intention and the design all along the way. Now, cumulatively, it is going to be a reduction in the total Social Security income because the stay at home spouse would have been entitled to half of the income of the working income earning spouse. Well, that that stays the same. So in and of itself, each individual's amount. But again, it's more than the sum of one plus one equals two because the total Social Security income has about a two third reduction, therefore. So you do need to be very careful and understand the implications of that, what that means for your income situation from Social Security, which can be a very valuable component of of a more secure and sound retirement.

Exactly. And last, you should take a closer look at health and life insurance. Yes, specifically life insurance. Of course, if there are policies in place already, update those beneficiaries.

There are some horror stories in both the financial and legal world of when beneficiaries on different financial instruments, including life insurance, were not updated. And maybe an in-law who is now an outlaw or an ex spouse is still listed as beneficiary, but also in the terms of the divorce decree and the quadro, the qualified domestic relations order. A lot of times there is some ongoing financial responsibility and liability from one spouse to the other for alimony or ongoing payments and and and compensation of some sort.

Right. Well, what if that one spouse who is to provide that passes away? What if there is a pension that is to be split?

But that pension is set up for single life only. And then if that spouse passes away, the ex spouse who was reliant on that income or those ongoing payments is out of luck. So a lot of times in order to prevent that from happening, there is some amount of life insurance that's actually mandated as part of the divorce right within the divorce decree or the quadro that is to be put in place and maintained. And a lot of times the beneficiary of ongoing payments is the owner of the policy and the beneficiary of the policy, but the policy is actually on the life of the ex spouse so that you know you are in control of the life insurance. It is on the ex spouse. They have to pay the premium payments for it, but you are the beneficiary in case something happens to them. Just make sure that you are taking the steps to protect yourself. And if there is some ongoing financial liability or expectation of obligations that you are speaking this through with your attorney as well as your financial advisor, these are all going to be important things. Right.

And you bring up a great important last point. Going through divorce is about surrounding yourself with friends and supporters. And one of those supporters should probably be a financial advisor.

Why is that? In the dichotomy in the married couple, a lot of times there is one person who handles the finances, right? It can be either one, but a lot of times it is kind of the responsibility taken on by one of the individuals. And if you go through the divorce, maybe now you become that head of finance, chief financial officer of the household when it is not a job that you were used to taking on. And so therefore, especially in that circumstance, but I think at any point in time, it always is beneficial to double check things, right?

Even if you are capable and have a pretty good handle on things, just running something by somebody is never a problem. But especially if that has not been your primary role, making sure that you find a trustworthy resource to talk through very important life altering financial decisions and things that are going to have bearing for years and years to come. So important to have your own advocate, Peter.

Well said. If somebody has questions about anything we have covered, what is the best way to reach you? You can give us a call at Rashaan Planning, 919-300-5886, 919-300-5886, or you can go online, RashaanPlanning.com, it looks like RichOnPlanning.com, it is my last name, Rashaan. You can email me, Peter at RashaanPlanning.com. All right, Peter, thank you.

Always a pleasure, Erin, thank you. This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment, tax, or legal advice from an independent professional advisor. Any investments and or investment strategies mentioned involve risk, including the possible loss principle. Advisory services offered through Brooks' Own Capital Management, a registered investment advisor. Fiduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker-dealer services. You are advised to consult your partner management while insurance products pay a commission which may result in a conflict of interest regarding compensation.