It’s uncomfortable. It’s emotional. But, it’s reality.
It’s called “grey divorce”— a growing trend that’s changing the retirement market. According to Statistics Canada, about 20% of people between the ages of 55 and 64 and 12% of those 65 and over were either divorced or separated in 2011. As our aging population grows, so will these numbers.
It’s a reality that some of your clients are either divorced, in the midst of one, or will be heading toward divorce in retirement. There are unique challenges facing later-life divorcees, including understanding and taking ownership of personal finances — a first-time experience for some. In the midst of emotional turmoil, you can help guide divorcing clients through new financial territory.
FINANCIAL TO-DO’S FOR DIVORCEES
As a start, provide your clients with a list of suggested tasks to make the financial side of their divorce less stressful. Having the facts can help determine how a divorce might impact their short-, medium- and long-term plans.
Here is a checklist to get them started:
For specific details about dividing up pensions in divorce, read Who gets the pension in a divorce? on Brighter Life.
While your clients might not be ready to think about the future in the midst of a divorce, it’s wise for them to start thinking about their newly single — or possibly remarried — life. Here are a few things you can discuss:
- Basic living, with less. No matter when in life it occurs, divorce can be costly. But when it involves retirees with a limited retirement income, the financial effects often intensify — as a result of living on one income/pension.
- Lifestyle of the newly single. Depending on how a divorce turns out, a person’s lifestyle could change dramatically. Clients need to be prepared to potentially make financial sacrifices, changes to their lifestyle and pay attention to their spending habits.
- Saving to rebuild assets. Essentially, divorce requires people to build a new life with reduced assets. However, unlike their younger counterparts, those who are in their 50s, 60s and beyond have less time to rebuild those assets.
- Health costs increase with age. Even the healthiest people entering retirement will experience an increase in health expenses as they age. There’s a 49% chance that a 65-year-old man will need long-term care, and a 65% chance for a woman.1 Because they will potentially need to pay someone to take care of them, single clients can expect to spend more on a per-person basis for an equivalent lifestyle than a retired couple.
- Legacy – the impact of remarrying/coupling. In 2011, Stats Canada reported that 76% of senior men and 55% of senior women remarried following a divorce. When retired clients are getting remarried, there can be complications with ex-spouses, step children and retirement savings that they will need help navigating, especially when it comes to legacy planning for an expanded family.
1 Munich Re, 2011