Broker Check

More Over-Age-50 Divorces and More to Think About for Divorcees

by Howard Hook, CFP®, CPA

As published on, February 14, 2013

Married Americans over the age of 50 are splitting up at a record pace, and that presents them with a unique number of problems and challenges. According to a study from Bowling Green University, the divorce rate for Americans age 50 or over doubled between 1990 and 2010. In that time, one in four U.S. divorces involved Americans aged 50 or more. Here are some more points from the study: The rate of divorce was 2.5 times higher for those in remarriages versus first marriages, whereas the divorce rate was lower the longer a marriage lasted. More than 600,000 people aged 50 and older got divorced in 2010, but little is known about the predictors and consequences of divorces that occur during middle and later life.

What can older divorcees do to minimize the financial impact of divorce on their lives, especially as they get closer to retirement? We reached out to Howard Hook, a certified public accountant with Princeton, N.J.-based EKS Associates, for some answers. Hook says the deck is stacked against older divorcees, for a variety of reasons:

They have no second person in the household to help in some of the planning strategies.

Hook says: Probably the most difficult issue faced by a recently divorced person is managing their time. Whereas prior to the divorce there was some sort of division of the household chores amongst the spouses; now a recently divorced person finds themselves having to do everything themselves. Some of these, such as balancing a checkbook or saving for retirement, are items that someone may never have had to do in their lives or at least not for quite a long period of time. Having to learn or relearn a new skill set is hard enough at any age, but probably harder for someone 50-plus who does not have the time to begin with to devote to doing these things.

They are not eligible to use some of the strategies widely available to married people.

Hook says: Certain options available to married couples are not available for recently divorced people. For example, if one spouse loses their job and the family needs health insurance, one option available to a married household where both spouses work would be for the family health insurance to be picked up by the other spouse. This is an option not available to a recently divorced person. A careful review of the health insurance options (COBRA, Medicare, private insurance) available to someone without a spouse is crucial to ensuring that cost-effective health insurance will always be available.

Disability is another area of concern. The loss of income due to one spouse's disability may not be as catastrophic for a two-income-earning married couple. For the recently divorced person, this could be devastating. In addition, the recently divorced person may need someone to care for them while disabled, which can be costly. For a married couple, the cost may be less since the nondisabled spouse may be able to take care of the disabled spouse. Privately owned disability insurance becomes more important for the recently divorced person to help mitigate this exposure.

A final example is pension benefit options. Most pension plans allow married couples to elect to have their pension benefits paid out over their own life and the life of their spouse, ensuring that the pension income will not stop at the death of the pensioner. This option is not available to a recently divorced person who may be caring for someone, such as a parent, sibling, child or other family member who might need the pension income after the death of the pensioner. In this case, taking a lump sum from the pension rather than choosing a payout option may work better for someone recently divorced who knows they will need the availability of these funds beyond their own life

They are at a disadvantage in terms of taxes, as the tax code favors married people.

Hook says: The United States uses a graduated income tax system whereby the higher your income the higher the rate of tax on your income. The amount of income subject to higher rates begins at a lower level for single taxpayers than it does for married taxpayers. For example, in 2012, married taxpayers will see their income taxed at 28% once taxable income exceeds $142,701, while single taxpayers will see their income taxed at 28% once taxable income exceeds $85,651. This disparity exists for all tax brackets -- except for the 35% tax bracket, at which both married and single taxpayers pay 35% once their taxable income exceeds $388,351. What this means is that the recently divorced 50- plus person with taxable income of $150,000 will pay more income tax than the married couple with taxable income of $150,000 -- 19% more.

They are largely ignored by financial professionals.

Hook says: Recently divorced people over 50 are an under-served market because there is a mistaken belief that certain planning strategies are not appropriate for nonmarried people.

One of the major reasons married people purchase life insurance on their lives is in the event that one spouse were to die prematurely, the proceeds of the life insurance could be used by the surviving spouse for support. There may be a presumption that life insurance is not necessary for the recently divorced 50-plus person because there is no spouse to support. However, people are living longer, and as such the recently divorced 50-plus person may have parents who are still alive that they are supporting. The parents may be negatively impacted if the recently divorced 50-plus person were to die, so the use of life insurance may be just as appropriate.

The same situation can arise with long-term care insurance. The insurance many times is sold to preserve assets for the spouse that does not need care. With no spouse there may be a presumption that there is no need for long-term care insurance. Assets will be sold to pay for care and if nothing is left over, so be it. However, in addition to the financial reasons for long-term care insurance, there may be nonfinancial reasons as well. Long-term care insurance policies provide for care managers to help determine levels of care as well as the plan of care. The presence of insurance can assist someone in being accepted into a facility that they otherwise would not have been able to get into due to their existing assets.