Rise in older divorces threatening retirements

More Australians are divorcing later in life, leading to “unique, confusing and overwhelming” challenges for couples aged over 50.

Australian Institute for Family Studies (AIFS) data shows the divorce rate among people aged in their 50s and 60s has climbed sharply in the past two decades, and the overall number of divorces climbed 13.6 per cent between 2020 and 2021 to 56,244.

The median age of divorcing men jumped from 41.4 to 45.9 years between 2000 and 2021, while for women it rose from 38.6 to 43 years.

Also known as a ‘grey divorce’, these later-life breakups are having a hugely detrimental effect on retirement plans.

“The financial issues are difficult to deal with under normal circumstances let alone when you are trying to manage the emotional impact of the breakdown,” says National Seniors Australia.

“It can mean that the retirement you’ve planned as a couple is no longer achievable as individuals.”

Why there’s a rise in older divorces

National Seniors says the rising numbers of older divorces reflect a range of changing factors including people marrying later – the median marriage age is over 30 – living longer, illness and career changes later in life.

Older divorce can take a “particularly serious financial toll” on older women, said family law specialist Jennifer Hetherington. Many women in that age group were homemakers who had done less paid work than younger women and had less money saved in superannuation. A split later in life left them vulnerable to poverty.

“Separation at any age can be difficult,” Ms Hetherington says.

“However, grey divorce has unique challenges and requires expert family law and financial advice, to ensure that both spouses can survive in their golden years.

“With grey divorces you change from joint goals for your financial future and retirement, to trying to divide what you have built over a lifetime together, to both start over. Your retirement plan goes out the window and you need to plan from scratch.”

Older couples are mostly concerned about retirement incomes, the family home and providing an inheritance for their children, she says.

Expensive and complicated

Estate planning solicitor Susan Bonnici told The Australian that divorces later in life are typically more expensive and complicated because older divorcees have had more time to accumulate and intertwine their assets.

“There may be more complex financial structures, such as family trusts, self-managed super funds, business interests or property portfolios that the couple have worked hard to develop during the course of their relationship that will then need to be divided when they divorce,” she says.

“Disentangling these assets and changing ownership structures can be a complicated and expensive process.”

Business Insider lists some of the other issues they face in the divorce: “… division of retirement benefits, confusion over beneficiaries, more complicated marital estates to divide up, health insurance … healthcare expenses overall and, potentially, more than one support obligation.

“Additionally, a financially dependent spouse may feel they need more support given the reduced likelihood of starting a career late in life, and a financially supporting spouse may be worried about their ability to keep up support payments as they slow down or retire.”

Couples should consider estate planning and postnuptial agreements to “lay out future expectations not just for the individual, but for their family”.

Keypoint Law says individuals facing divorce in retirement may be concerned about having sufficient superannuation, and whether their costs of living can be covered by one income, “especially if they will become or are reliant on Centrelink”.

Role of the Family Court

The Family Court decides on the division of assets after a divorce by considering how much is available, the contributions of both parties, the future needs of both parties, and making the split up of funds equitable.

The longer argument continues about the division of assets, the more expensive it becomes for both parties.

Keypoint suggests that those considering divorce undertake a thorough budget of living expenses and whether you can borrow against a house to pay out your former partner. You should also make sure you have copies of home loans, bank accounts, superannuation and insurance documents. They advise talking to a financial planner if you’re considering selling a house as part of the split.

Often, one member of a long relationship has little awareness of the couple’s finances, says Ms Hetherington.

“When people are married for a long time, they each take on their own roles in the relationship and it is not uncommon for one spouse to take care of the money.”

Ms Hetherington says property settlements after a grey divorce need to be properly structured to cater for needs in retirement.

“There is no point in taking an expensive home that generates you no income, and not having money to live on.

“When we assist a woman with a grey divorce, we work with financial planners – in particular, those with expertise in retirement planning – to ensure that financial outcomes are maximised.  It is not as simple as selling everything and dividing it – that can result in less money for everyone. A carefully crafted agreement can maximise outcomes for both spouses and ensure financial security moving forward.”

Degree of animosity

US site survivedivorce.com points out that in grey divorces, the assets to divide can be bigger, “increasing the likelihood of animosity between spouses”. 

“Unwinding assets can be more complicated when trying to determine which assets are community/marital property and which ones are not.”

It also urges divorcees to get expert help from a family law attorney or forensic accountant to assess the couple’s assets. Keeping the family house or not is the most important decision the couple faces.

“Often, a spouse will trade off with one spouse agreeing to keep the house in exchange for the other spouse keeping their retirement funds intact. Be careful about going down this route. On the surface, it may look like a good deal. But between taxes, lack of monetary appreciation, upkeep and other factors, keeping the family home may instead turn out to be a trap.”

So, if you believe you are likely to split with your long-term partner, ascertain your income and your expenses, work out your retirement savings goals and get the experts on your side.

You need a plan.

Do you know the details of your finances? Who would you turn to if you split from your partner? Let us know in the comments section below.

Also read: How is superannuation divided during divorce?

YourLifeChoices Writers
YourLifeChoices Writershttp://www.yourlifechoices.com.au/
YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.
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