Grey Divorce: The unique issues of divorce and retirement

An increasing number of over 50s couples are separating, which is a concerning statistic. While there are, of course, significant challenges for a couple separating at any stage of life, the issues facing couples over 50 can be quite unique, confusing, and at times, overwhelming.

Sometimes called ‘grey divorce’, the incidence of older couples separating is on the rise, with the average age of people getting divorced shifting to people aged in their mid-40s, and a significant increase in the numbers of those separating after the age of 50. 

This may be due to a number of factors, including people marrying later, living longer, retiring later in life, maintaining their health and activity into older age, or changing careers later in life. It would seem some couples will divorce once the children have left home, as this was the main thing the couple had in common and the primary reason they were staying together.

When people start to slow down and retire, they spend more time at home and with their spouse. This is when differences in values and interests may surface or their priorities may change  which the couple didn’t realise were there before.

Let’s have a look at some of the unique concerns facing older couples and those that are closer to retirement.

Financial Concerns for Older Couples

Couples of any age face financial strain, including young couples and those that are just starting out, buying homes and establishing families. Yet people approaching or entering retirement naturally also worry about how they will support themselves on a pension or on superannuation. 

Aside from the emotional side of separation, the over 50s commonly feel unsure about how they will keep their home; which is concerning and raises stress again after so many years of paying off a mortgage. The division of the family home and the couple’s superannuation are usually the most valuable assets and the points of most concern for separating couples.

Couples also want to protect their legacy through an inheritance for their children.

Individuals facing a divorce in retirement may be concerned about having sufficient superannuation, and how a person’s basic costs of living will be met on one income, especially if they will become or are reliant upon Centrelink. 

People in this position can face an uncertain future, raising a lot of angst and pessimism. 

The Difficulty of ‘Traditional’ Roles

Adding to this pressure is the fact that this generation tends to have a higher proportion of couples in ‘traditional’ roles, or example where a wife who has not worked at all or for a long time, and is not familiar with managing finances and investments. Older women who are used to a more ‘traditional’ role of wife and mother can sometimes find the prospect of separation even more overwhelming and daunting.

How Does the Law Decide?

In family law, the principles that apply in determining a division of assets for the over 50s are the same as those for other age groups. 

The Family Court adopts an individual approach to each family situation but considers:

• the asset pool available for division
• the contributions the parties have made to that asset pool
• the ‘future needs’ factors that are outlined in the Family Law Act
• and whether the division is just and equitable in your particular circumstances.

What changes when the legal process considers older couples is the weight given to different considerations depending on the stage of life. 

For example, in the case of couples in their 50s and over, contributions during the relationship are more likely to be determined as equal and the courts will consider the age and health of parties as opposed to whether there are dependents or any responsibility for child support.

The court can make a decision through a formal written agreement, consent order, or if an arrangement cannot be made, through a court order by a Judge.

One of the main things to remember is that the harder the matter becomes to settle between the parties as a couple, the more costly the legal fees will become, which reduces further the money the couple is trying to divide.

What you need to consider

The best place to start at this time is to arm yourself with as much information as possible about your financial situation, including what you own as a couple, and what you will need to survive as a single. You might need to undertake a thorough budget of what it costs to live as you do currently.

Like many people in this situation, you also need to consider whether you have a capacity to borrow against the house to pay out your spouse or former partner, and who is entitled to any inheritances you may have received.

Another major challenge facing this generation is superannuation. Generally, you need to consider whether superannuation has been converted into a pension, if it is a lump sum, or whether the fund may be split between both partners.

It’s important to know where documents relating to home loans, bank accounts, superannuation, and insurance are located, as they are relevant when assessing your family law property division. If these documents can’t be found or you can’t reach amicable terms, it may be appropriate to seek help from a financial or legal professional.

Consulting with a financial planner at this time is a very good idea. You might consider downsizing to a smaller home or buying out your former partner to keep the family home, but both decisions come with financial risks. Going into any debt at this time is very risky.

It may be more sensible to sell the family home, put the money into your super and live off this income – but these are all decisions that you need to consider and seek advice on regarding your specific circumstances.

What can you do?

If you’re heading for divorce, it’s important to take stock of your financial position as soon as possible. 

StatePlus advises that there are five things you can do now to get your finances in the best shape for your future:

1. Do a financial audit – if you don’t already have a good overview of your own savings and income, assets, and liabilities, do a thorough audit. Bring all the information together so it’s easy to access and have a back up for account details, statements, and other financial paperwork stored online. If your spouse was the one who usually took responsibility for managing the finances, now’s the time to get up to speed.
2. Monitor cash flow – having enough money to cover day-to-day expenses is important for your immediate peace of mind. It might be a good idea to set up a “rainy day” savings account to ensure your cash flow is covered, should any unexpected expenses surface.
3. Steer clear of debt – make sure you’re being disciplined with your spending and avoid building up a significant amount of personal debt through loans or credit card balances. Debt can soon add up if you’re not carefully monitoring your spending, so try to avoid it.
4. Check your will – review and update your insurance and super beneficiaries and your estate plan to make sure your assets will pass to the right people now that your circumstances have changed.
5. Keep a healthy credit rating – outstanding bills or loan repayments can affect your credit score. Make sure you only have your name on bills and loans that you’re responsible for paying.

Final Thoughts

Living independently after divorce requires knowledge, planning, and also communication. 

It will always be helpful to get independent advice before making any significant decisions about dividing up assets. The more knowledge and support you allow yourself, the more confidence and security you will feel moving into the future.

If you are over 50 and considering separating, timely legal advice will help you clarify your rights and responsibilities, and assist you in clarifying your financial options. In a real sense, it can help prevent you from feeling overwhelmed.

If you are facing separation and are confused about your situation, I may be able to help. Get in contact to find out more about your specific matter and what you may be entitled to.

 

Resources

https://www.smh.com.au/money/planning-and-budgeting/grey-divorce-has-huge-impact-in-the-retirement-years-20150527-ghah6i.html

https://moneysmart.gov.au/getting-divorced-or-separating

https://www.stateplus.com.au/learn/prepare-for-retirement/divorce-and-retirement