Separating after decades: coping with grey divorce

The number of couples divorcing in their 50s or older is increasing, posing some unique financial challenges, as there is much less time to mitigate any consequences of dividing up assets late in life.

While past generations viewed retirement as a time to slow down and enjoy the remaining years, couples now realise that increased longevity may see them spending decades together in retirement. If your marriage is unhappy or unfulfilling, a new direction may be appealing.

Divorce is less stigmatised and women are also more financially independent than previous generations, giving them more options. “These factors, combined with a stronger focus on personal fulfilment, lead to a higher incidence of later-age divorces,” Sue Torr, managing director of a Cape Town financial planning practice, Crue Invest, explains.

Added financial complexity

Dubbed grey divorces, the end of a marriage later in life, is generally more complex; assets such as property or investments may be intertwined after years of accumulation. These assets may also have formed the basis for a joint retirement plan, which will dissolve on divorce.

Divorcing spouses have limited time to make up any financial losses that come with separating their lives, one spouse may have been out of the job market for years, healthcare costs typically increase later in life and the prospect of starting over may feel daunting.

It is more expensive for each partner to run their own home than it is for two people to live in a joint household, as there are no shared expenses. This impacts both spouses, but women are generally more vulnerable due to their longer life expectancies, lower accumulated savings and career interruptions during child-bearing years.

“Men may lose non-financial support systems, while women struggle to maintain their lifestyle,” Lizl Budhram, head of advice at Old Mutual Personal Finance, explains.

No financial winners

Your marital regime has an impact on the division of assets on divorce.

Simon Dippenaar, attorney and managing partner of Simon Dippenaar and Associates, says older couples are more likely to be married in community of property, which means that assets, including the family home, are divided equally at divorce.

“Women are often more attached to the family home than their husbands are. If a wife wants to keep the home, she needs to ‘buy out’ the husband’s share and will need to sacrifice something to do so, for example, taking reduced maintenance or a smaller share of a pension.”

Both parties typically experience a decline in their standard of living, but women generally take a harder hit. According to Dippenaar, data from the United States suggests that women who divorce after 50 experience a 45 percent drop in their standard of living, on average, compared to a 21 percent decrease in living standards for men of the same age.

Protecting yourself

The best form of protection is for every spouse in a marriage is to be financially astute from the first day of marriage, including having your own retirement savings and investments.

Even if you are not the breadwinner or the financially savvy one, “stay informed about household finances, including all assets, liabilities, income streams and policies,” Torr advises. “And never sign any settlement before obtaining financial and legal advice.”

If you are getting divorced, it’s crucial that there is full financial disclosure by both spouses. “Without this you can’t negotiate on an informed basis or do a proper calculation for the division of assets,” Eleanor Kritzinger, attorney and head of litigation at Louw & Coetzee attorneys, explains. 

She also suggests that divorcing spouses who are unable to support themselves should seek spousal maintenance if they are entitled to it, either for a fixed period of time or for life.

Sharing in your spouse’s retirement savings may be the best form of financial security. If you get divorced before retirement, a spouse’s savings in a pension fund, provident fund, preservation fund and any retirement annuities accumulated during the marriage may be considered part of the marital estate. A portion of these savings can be assigned to the other spouse through the divorce order.

Once retirement savings have been split, both partners will need a plan to ensure they can live on the income their savings will afford in retirement. Having a plan before or as soon after the divorce will afford you the time to do as much as you can to improve your retirement outcomes.

Divorce after retirement

Divorce after retirement may be more complex. If you or your spouse receive a monthly income from a guaranteed life annuity, these income payments cannot be adjusted to provide an income to the former spouse after divorce. If it is a joint and survivorship annuity, the contract is on both spouses’ lives, so if a former spouse survives the annuitant, they may be entitled to this income even after divorce. 

Other income streams, such as that drawn from a living annuity, will continue to pay to the spouse who owns the investment, and a portion of this can only be paid to the other spouse if the divorce agreement includes spousal maintenance payments. However, case law provides for the income stream to be valued and included in the marital estate when the assets are split on divorce.

If a divorce is looming

The future you had planned will change, you may find this difficult to accept, especially if you are grieving the loss of a long-term partnership.

The sooner you focus on rebuilding your emotional well-being and financial stability, the better the outcome. Adult children may also find your divorce traumatic, but seek support from family and friends, or even a professional therapist.

A divorce provides an opportunity to form a new social circle and to find new purpose or direction. If you receive a divorce settlement you may be able to use some of it to invest in professional growth, increasing your skills and enhancing your earning potential.

Make sure your financial preparation is in order and consult both a good attorney and financial adviser who will be able to understand what is at stake, ensure decisions align with your long-term financial security, and structure a plan to safeguard your retirement income in the coming years.

“Don’t forget to review your will and estate planning,” Kritzinger says. “Make sure everything fits in with your new circumstances.”

The “silent divorce” alternative

A “silent divorce” means you remain legally married but live separate lives, which can be more financially secure, particularly for the vulnerable spouse, Kritzinger explains.

This option preserves shared medical scheme contributions and retirement income and avoids the capital gains tax and other tax implications that can arise from splitting assets.

However, spouses need to decide whether the emotional toll is worthwhile. Remaining married might make financial sense, but the divorcing spouses are the only ones who can decide if it worth trading happiness for financial security, Dippenaar says.