Whether it’s due to an empty nest, different interests or irreconcilable differences, an increasing number of Canadian couples ages 55 and up are heading to divorce court. This phenomenon, also known as “grey divorce”, is a growing trend and it’s changing the retirement market.
Statistics Canada reports that, in 2008, there were 1,237 divorces among women 65 and older, 2,486 among men of that age and 852 divorces where both partners were over 65. As our aging population grows, so will these numbers – as will the financial challenges.
No matter when in life it occurs, divorce can be costly. But when it involves seniors with a limited retirement income, the financial effects often intensify.
Essentially, divorce requires people to build a new life with reduced assets. Unlike their younger counterparts, however, those who part ways in their 50s, 60s and beyond have less time to rebuild those assets. In addition to divvying up the family home, personal belongings and other effects, the pool of money intended to fund one couple’s retirement is split two ways.
No doubt, clients in this situation will appreciate sound financial advice, not just to make the most of their remaining assets but to regain their financial footing.
Delayed retirement – One option you can suggest is to put off retirement. Rather than retiring at age 65, for example, some clients should consider several more years in the workforce – full-time, part-time or seasonal – and use those earnings to get back on track.
Cost cutting – Another strategy: spend less. Sit down with clients to review their expenses and determine what’s necessary and what’s not. A smaller home, more fuel-efficient vehicle, fewer vacations and greater awareness of where their money goes every month could mean substantial savings.
Legacy plans and gift giving – Leaving an inheritance or giving money to a good cause is admirable. So is paying for grandkids’ tuition or a family wedding. But when money’s tight, it’s not always practical. Remind your clients that their retirement may last 30 years or more, during which time they’ll have basic and health-care expenses. Encourage them to rethink their legacy and gift-giving plans in favour of covering these needs.
Money matters – In many long-term marriages, because one spouse may have handled most if not all the finances, the other spouse may need guidance about budgeting, savings and investments, life and health insurance, retirement income options, etc. Ask clients if they need help regarding basic money matters, offer your support and encourage them to learn more through books, the internet and other resources. Clients may also have questions regarding pension money, particularly if one spouse has earned a substantially larger amount. Pension division is very complicated; encourage clients to seek legal advice before making any decisions.
By being prepared to help your clients navigate the complicated waters of a late-in-life divorce, you can continue to support their retirement goals.