Divorce After 50: Financial Guide - SmartAsset

Grey divorce rates are rising fast — the over-50 crowd makes up a quarter of all divorces, according to the American Bar Association. A seismic financial shift like divorce so close to retirement has the potential to be ruinous, but it doesn’t have to be. Here are the several steps you should take after a divorce if you’re over 50 to ensure your golden years aren’t just solvent but rather thriving.

For help planning for retirement after a divorce, consider working with a financial advisor.

Tip #1: Assemble Accounts and Update Beneficiaries

Splitting financial accounts can get messy, and figuring out what you have and what you owe can get complicated quickly. Review your divorce decree and financial statements for an easy refresher on what you need to be taking care of. You may need to open new bank accounts, rollover investments and refinance loans.

For all of your existing and new accounts, be sure to update your beneficiary to someone new if you don’t want your former spouse to be listed. You’ll also need to update any auto-payments so your bills are paid on time from any new accounts you’ve opened.

Tip #2: Track Spending and Adjust Your Budget

Adjusting to life as a single person can be difficult, especially if you’re used to combining
finances for decades. You may feel the need to go out and spend money on things your former spouse never allowed you to. Try to resist the urge until you get a clearer picture of what your budget as a single person looks like.

In the beginning, track your spending as you adjust to your new lifestyle. Many banks offer
budget tracking through their websites. If you have accounts across multiple institutions,
applications like Mint, Empower and You Need a Budget can pull data from all those places and compile it into a clean interface for you.

As you learn where you’re spending your money every month, you can adjust it to focus more on spending where it really matters to you.

Tip #3: Know Your Social Security Benefits

If you were married for at least 10 years before your divorce, you could be eligible for spouse’s benefits from Social Security, but only if you’re not remarried to someone else when you hit retirement age. An auxiliary spouse’s benefit will pay you up to half of what your spouse is eligible for at full retirement age if that amount is more than you can get on your own earnings history.

Auxiliary spouse’s benefits historically come from a time when one spouse didn’t work outside of the household. For many couples currently in their 50s, having one partner with limited paid employment isn’t as common as it was for previous generations. Most people will get more on their own earnings history than they would receive by getting half of a spouse’s. The spouse’s benefit through Social Security doesn’t affect your former spouse in any way. They cannot dictate whether you’re eligible for it or not in a divorce decree.

Tip #4: Know About Widow/Widower Benefits

If your ex-spouse passes away, you could still be eligible for a surviving spouse benefit. To
qualify you’d need to be married for at least 10 years before divorcing and either be single or remarried after the age of 60. Unlike the auxiliary spouse benefit, you have a choice in which benefit you take. For example, you can take a surviving spouse benefit at 60 and let your own grow until it maxes out at age 70 if that’s most advantageous to you.

To file for Social Security benefits you don’t need to do anything until you’re ready to start
claiming them. You can file your application online for auxiliary spouse benefits through the retirement application at ssa.gov. The system automatically screens you for eligibility from previous marriages. It will automatically give you whatever you’re eligible for that gives you the greatest monthly benefit. You may be asked to provide a marriage certificate and divorce decree after filing, so make sure you don’t burn yours just yet.

Tip #5: Consider Catch-Up Contributions

Living on your own typically costs more than living with a married partner. Use a retirement calculator to see what you’ll need to live on and if your savings are on track. You may find that you’re behind. If you’re over 50, you can take advantage of increased catch-up contribution limits to retirement accounts.

Try to get as close to maximizing them as possible now so that you don’t find yourself struggling to afford your needs and some luxuries later. You likely can still earn more now through work, but one day you may not be able to.

Tip #6: Review Cost-Saving Measures

Thinking outside the box after a divorce at 50 can help you stay financially solvent or get back to solvency if legal fees have put you in debt. Focus on the biggest strains on your budget first. An occasional treat can add up, but big expenses like housing, transportation and education can make or break your new budget.

If you’re able to work from home, you may be able to get rid of a car and rely on ride-sharing apps or public transit. If you’re helping adult children pay for their educations, it may be time to reassess what you can afford to contribute. If you’re an empty nester, you may be able to downsize to a more affordable housing situation. Cohousing communities can help you find companionship, save on costs and even age in place when the time comes.

Bottom Line

Divorce is never fun, but it can be especially difficult when you are older and close to retirement. There are ways, though, that you can go through a divorce and still have a financially secure future.

Financial Planning Tips

A financial advisor can help you plan your future, regardless of your marital status. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Make sure your saving for retirement using a workplace retirement plan like a 401(k) if you have access to one.