The older you are, the more complicated it getsby Lili A. Vasileff, CFP®, MAFF™, CDFA™ Lili A. Vasileff is President of Wealth Protection Management, based in Greenwich, CT, a fee only Certified Financial Planner (CFP®), Master Analyst in Financial Forensics (MAFF™), Certified Divorce Financial Analyst, Mediator, Collaborative Financial Specialist and Trainer, and litigation divorce financial expert. She is a nationally recognized speaker, practitioner, writer, and author of five books on divorce, including: “Money & Divorce: The Essential Roadmap to Mastering Financial Decisions” published by the American Bar Association. Lili is President Emeritus of the national Association of Divorce Financial Planners (ADFP). Her awards include the prestigious 2013 Pioneering Award for outstanding public advocacy and leadership in the field of divorce financial planning. Her website is www.wealthprotectionmanagement.com.
Gray divorce is unsettling. Couples 50 years and older can face big financial surprises. Quoting from my article series for Psychology Today, the gray divorce rate has doubled since 1990, and for those 65 and older, it has tripled. The increase in breakup rates is mainly first marriages, and more than 55 percent occur with couples married for more than 20 years. Researchers predict that by 2030 the divorce rate for the gray divorce population will triple.
Generally, the older you are, the more complicated divorce is. Divorce is multidimensional and emotions overlay legal and financial issues. Older couples face a lot of challenges which may include:
- Demanding careers or involuntary retirement
- College tuition bills for children
- Adult children or elder parents requiring financial support or caregiving
- Reduced economic cushions due to market volatility, inflation, and shrinking financial security
- Insufficient cash flow to meet living needs
- Health care worries
1 in 5 couples say money is their biggest challenge: specifically, the lack of communication about money. Nearly a third of Baby Boomers say their marriage ended because of conflicts over money and decreased openness about finances over time. They do not regard their spouse as a financial role model and fewer than half make financial decisions in partnership with another household member. Friction can lead to bad behavior around money.
Two topics not often addressed are essential to better understand the dynamics of gray divorce and break-up of long-term relationships. These topics are financial infidelity and lack of synchronicity in retirement planning. Being on the cusp of retirement and facing divorce, financial reality is exposed. Many divorcing couples who have never dealt directly with their partner on financial decisions now face heightened scrutiny from not only their spouse, but from a team of professionals. Often the divorce process is sidelined by the unveiling of financial facts. Discovery of the unknown cracks in their financial planning is unpleasant, humbling, and sometimes hurtful for both spouses.
You may think that the older you are and the longer you are married, the harder it is to hide a big financial secret. The sad reality is financial infidelity has been called the new “adultery” but rarely constitutes legal grounds for divorce. It often starts small and gradually leads to a loss of intimacy in a relationship.
Financial infidelity is about deception in marriage. It is not just about arguing over money. It is the secretive and purposeful act of spending money, holding secret accounts or stashes of money, borrowing money, or otherwise incurring debt unbeknownst to or against the will of one’s spouse. Older divorcing spouses are particularly vulnerable if their spouses are dishonest about money.
My client “Bonnie” has been married for 27 years and recently discovered that her spouse has a serious gambling addiction problem. Her spouse had depleted all his and her retirement accounts as well as the 529 college savings plan accounts for both daughters. Like many couples, he assumed over the years the role of family investment manager; but now it was all gone, except for their house. Bonnie took immediate action. All assets and accounts were retitled into her own name only, a postnuptial agreement was executed to recoup from her husband’s earnings what were her savings and the children’s, and a plan was made to support his health recovery. Bonnie took control over all aspects of their financial life and husband was complying with all terms to repay her. Fast forward three years later on the cusp of his retirement, he relapsed with his addiction and now was in enormous debt. Bonnie was devastated and felt betrayed even more so this time, with trust irreparably damaged and divorce imminent.
A recent Harris poll conducted for National Endowment for Financial Education found:
- 85% of respondents said financial deception harms their marital relationship
- 42% admitted to deceiving their spouses financially, for example, by hiding accounts, debts, or spending habits
- 52% said financial deception is worse than physical infidelity
Less than 10% of spouses find out about financial infidelity via confession. Ignorance about money is not an excuse. Being older, there is limited time to recoup lost wealth or generate income. People often overlook the warning signs of how their spouse can perpetuate financial infidelity. Here are the red flags to watch out for:
- No longer sharing or discussing finances with full transparency
- Irrational behavior: Overspending or hiding purchases
- Covering up debts
- Hiding a raise or bonus
- Withdrawing money from accounts
Furtive financial behavior only gets worse with time. The more time that passes, the more difficult it can be to repair or heal your finances.
Lack Of Retirement Synchronicity
Another financial surprise that frequently erupts in gray divorce is the lack of retirement synchronicity. If couples fail to communicate effectively about money, they fail to share similar expectations for their retirement years. A Fidelity study found 48% of couples disagree about what age they should retire and 52% disagree about how much should be saved by that time. This is a ticking time bomb waiting to explode when older couples seek divorce. Untangling mismatched expectations exacerbates disagreements about what each is entitled to.
Jim and Mary have been married for 32 years and have worked hard all their lives. They succeeded in paying for 3 of their 4 children’s colleges. Burnt out and ailing, Jim wants to retire at 62. Mary wants Jim to work another 10 years to rebuild their savings. Mary decides to divorce Jim when their youngest is leaving for college. They have minimal savings left, but Jim intends to cash out his retirement account to pay for college. His intention is to treat all their children equally. However, Mary is terrified she will be financially insecure on the cusp of Jim’s retirement and divorce. She refuses to help pay for college or accept less than her full share of Jim’s retirement savings. Jim and Mary once shared the same core values but mismanaged their financial planning. They now must compromise on such issues as treating children equally; protecting their financial security; extending their work life; and redefining their lifestyle in retirement.
When couples are connected and can focus on mutually good decisions, they are more likely to commit to their financial plan together. Conversely, older couples who have never dealt with finances together cite financial incompatibility as the number one reason for divorce.
A Financial Transition
Conflicts over money can take many forms, whether it’s discovering one partner’s financial infidelity, parents arguing over whether to prioritize paying for college or save for their own retirement, or spouses at odds over working longer versus retiring. Gray divorce is a financial transition. Almost one third of all households age 55 plus have neither retirement nor savings accounts. For older women, the loss of accumulated wealth and income is harshest if they have been out of the work force for a significant period. Dividing one household into two cuts all resources in half.
The impact of gray divorce is far reaching. It affects housing, travel, retirement spending, and families, including adult children and grandchildren. Financial security, health care, and cash flow are the key goals to address in gray divorce. These goals take preparation, planning, and execution to avoid a devastating financial blow. Baby boomers are healthier and living longer than any generation before them. Gray divorce will impact the lives of older Americans for many years. Be realistic and follow professional advice to protect your retirement years and financial security.