Boomer Splits – A Costly Retirement Roadblock

Divorcing in the so-called Golden Years can have enormous implications on a person’s retirement, yet Baby Boomers are doing it at a surprising rate.  Divorces among people 50 or older doubled from 1990 to 2010, and in that year, one in four U.S. divorces was in that age group. Now 35 percent of all Baby Boomers have been divorced and the Boomers make up the majority of all divorced people in the United States.

Experts say gray divorce, as it is called, is a product of, among other things, longer life spans, but a sunset years divorce can be economically catastrophic. “Gray divorce can be economically devastating for some people, especially for women who have been out of the labor force bearing children,” says Susan Brown, professor of sociology at Bowling Green State University and co-author of the 2012 report “The Gray Divorce Revolution.”

“Gray divorce reflects changing attitudes about marriage,” Brown says. “We have much higher expectations today for what constitutes a successful marriage than earlier generations did. At the same time, society is more accepting of divorce as a solution to an unsatisfying marriage. For these reasons, gray divorce is probably here to stay.”

Gray divorce becomes a problem for both spouses because the pool of money funding retirement must be divided between two people living separately. That costs a lot more. A smaller pool of money means people must either reduce retirement expectations or delay retirement. “You have the same pool of assets that has to sustain two sets of retirement,” says Joe Sicchitano, senior vice president and head of financial planning at SunTrust Bank.

After divorce, the former spouses take separate vacations; drive two cars instead of one; and make twice as many trips to see the kids. Medical costs in the Golden Years are the wild card Boomers often choose to overlook. According to experts it costs 30 percent to as much as 50 percent more to retire for Boomers who divorce.

People must delay retirement or save a lot more in these last few years or reduce lifestyles, which is often the hardest for people. “If they are planning on retirement at 65, and they are 60, it may push them back to 67 or 68,” he says. “And those are the ones who have done (financial) planning. Those that didn’t are even worse.”

“These are people getting towards the end of the careers in the labor market,” says Bowling Green’s Brown. “In your 20s or 30s you’ve still got time in your employment to make up for that loss. People 55 or 60, are so close to retirement, there’s only so much time for them to make up the economic losses.”

Legal fees come out of the retirement pie pre-divorce, reducing what you will have to live on, and if the divorce is after retirement, those costs are virtually impossible to replace.

“You’re planning for a different lifestyle, no matter what, because things have changed,” says Grant Connes, co-managing director of Global Wealth Management in Fort Lauderdale. “Adapting to the changes a lot of times means scaling back. Many expect the divorce rate to go up among Boomers because now that people are living longer, they are having a second midlife crisis. It’s the second wave of midlife crises,” he says, “a late-stage midlife crisis.”

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