12 Money Mistakes to Avoid When Divorcing Over 50

Divorce rates are rising for people over 50

Reviewed by Pamela Rodriguez

The “gray divorce” rate—divorce among people over age 50—has been rising, with the rate among people 65 and older nearly tripling between 1990 and 2022. If your marriage is dissolving, the last thing you want is to find yourself alone with legal fees, therapist bills, and disappearing retirement dreams. To make sure you’re on solid financial footing, you’ll need to avoid these 12 common money mistakes, including financially supporting your kids, holding onto the family home, and underestimating your expenses.

Key Takeaways

• Divorce rates for people aged 50 and over are rising.
• Household income after a divorce drops much more for women than for men.
• At a minimum, you need a divorce lawyer and a certified divorce financial analyst (CDFA) to help you navigate the process.
• Make sure to create an inventory of all your assets and your debts.
• Don’t forget to include retirement accounts, health insurance, and tax implications.

The Financial Fallout of Divorcing After 50

Divorce rates in the United States declined between 2011 and 2021, according to the Census Bureau. Except for people over 50, and especially those 65 and older, as noted above.

“If late-life divorce were a disease,” said Jay Lebow, a psychologist at the Family Institute at Northwestern University, “it would be an epidemic.” As married couples grow older, the glue that holds many marriages together dissolves, whether that’s children, shared interests, or financial dependence.

Divorce at this age can be financially devastating. The cost of living is considerably higher when you’re single than when there are two of you who share expenses. More worrisome, a mid-to-late-life split can shatter retirement plans. There’s less time to recoup losses, pay off debt, and weather stock market fluctuations. Also, you may be approaching the end of your peak earning years, so there’s less chance of making up financial shortfalls with a steady salary.

These concerns are magnified for women. After a divorce, household income for women can drop precipitously. In fact, according to the U.S. Census Bureau, 20% of women (vs. 11% of men) who had divorced in the previous 12 months had fallen into poverty. What’s more, because women’s life expectancy is about 81 years (versus 76 years for men), a divorced woman can find herself living for a lot longer with a lot less.

Below, we list some of the major mistakes that divorcees make, especially when they’re over age 50.

1. Failing to Create an Inventory of Assets

One partner often has a better understanding of a couple’s finances than the other. This person likely has a solid idea of how much money their investment accounts hold, the value of their assets, and how much cash is in their savings accounts, while the other partner isn’t as up to speed.

If you’re the latter person, you’ll want to take an inventory of all assets before attempting to split them up. In addition to knowing what’s in your bank accounts, you should also track your retirement accounts and life insurance policies.

If you are concerned about your finances, visit your local legal aid website, where you may be able to ask for pro bono legal assistance and/or representation in a civil case if your divorce heads to court.

2. Holding Onto the House

If you end up with the family home, think long and hard about keeping it. It may be your refuge, and not moving might seem less disruptive for any children still living at home. Still, it can also be a money pit, especially with only one person paying for the upkeep, property taxes, and emergency repairs.

Before deciding to stay, figure out if you can afford the mortgage and the costs associated with maintaining the property. Also, keep in mind that property values fluctuate, so don’t assume you can sell your house for the amount you need if money becomes an issue.

3. Not Knowing What You Owe

OK, you may know what you owe, but do you know what your spouse’s debt is? In the nine states with community property laws, you’ll be held responsible for half of what they owe even if the debt isn’t in your name.

Even in non–community-property states, you may be liable for jointly held credit cards or loans. Pre-divorce, be sure to get a full credit report for both you and your spouse, so there are no surprises about who owes what.

Important

The nine states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, all assets that accrue to a couple during their marriage through any means other than inheritance or as a gift are owned 50/50 by the husband and wife. Debts, too.

4. Ignoring Tax Consequences

Almost every financial decision you make during a divorce comes with a tax bill. Should you take monthly alimony or a lump-sum payment? Is it better to have a brokerage account or a retirement plan? Will you keep the house or sell it? And who should pay the mortgage until it sells?

For example, you might be excited to know that your soon-to-be-ex will be handing over an investment account with gains of $100,000, but that portfolio comes with a tax hit. This effectively lowers the amount you’ll receive. Even providing child support can have tax implications, so consult an accountant or tax advisor to determine what makes the most sense for your situation before divvying up assets.

If you need help with your taxes after a divorce, you may be eligible for tax relief from the government. In order to qualify for this federal benefits program, you must be separated or divorced and be a taxpayer. The program can help you find someone to help you with tax return preparation.

5. Forgetting About Health Insurance

If your spouse’s policy covers you, you may be in for a nasty—and expensive—surprise, especially if you divorce before Medicare kicks in at age 65. Basically, there are three options:

• Your employer can cover you
• You can sign up for your state’s healthcare exchange under the Affordable Care Act (ACA)
• You can continue to use your ex’s existing coverage through COBRA for up to 36 months, but the cost is likely to be substantially more than it was before the divorce

If new, separate health insurance policies threaten to break the bank, you may want to consider a legal separation. Under certain circumstances, you can keep your ex’s health insurance while separating your other assets.

6. Rolling Over Your Ex’s Retirement Account Into an IRA

If you experience financial difficulties after divorce, keep in mind that individual retirement account (IRA) laws can trump those financial problems. So if you fund your own new IRA with your share of your ex’s retirement account and tap it before age 59½, you’ll still pay the standard 10% early withdrawal penalty.

There is a solution: You may be able to protect the IRA assets in your divorce settlement through a qualified domestic relations order (QDRO), which allows you to make a one-time withdrawal from your ex’s 401(k) or 403(b) without paying the standard 10% tax, even if you’re under age 59½. 

7. Financially Supporting Other Adults

You may find it necessary to use your finances to help others around you. But it’s important to take a step back. No matter how much you’d like to help your adult children or other adult family members, your priority is to ensure you have a healthy retirement income.

Warning

Find out your state’s laws regarding divorce and paying for a child’s higher education. Some states stipulate that divorced parents share payments for university expenses while other states view college as a conditional expense and not part of a divorce settlement.

8. Hiding Assets From Your Spouse

In divorces in which a lot of money is at stake, you may be tempted to hide assets, so it looks like you have less money to contribute. Doing this could set you up for legal troubles plus legal fees and court time if the assets are found.

Some of the repercussions for hiding assets from your spouse include a settlement that will give your spouse additional assets, a contempt-of-court ruling, or fraud or perjury charges.

9. Underestimating Your Expenses

When the income that once covered one set of household expenses is suddenly divided by two, you may have to make some changes to your spending to afford your daily and monthly expenses. Take a realistic look at how much money you’ll need to live on, and make sure you can cover all of your expenses after the divorce without relying on your ex.

10. Thinking Your Divorce Advisors Are Your Friends

What you pay your divorce advisors comes out of the settlement you get. Keep track of how much they are spending on your behalf. Remember that while conversations with your attorney may seem friendly and personal, this is a paid professional who is charging you by the hour for every interaction.

11. Overlooking the Value of a Future Pension

Don’t forget to include any part of a pension that was earned during the marriage. According to the Institute for Divorce Financial Analysts (IDFA), there are three methods of doing this:

1. The nonemployee spouse can receive their share of a future benefit.
2. The pension can be present valued and offset.
3. Both (1) and (2) can be combined.

When choosing your solution, be sure to keep your specific needs top of mind. What good does it do you to look forward to a solid pension down the road if you need the cash to survive now?

12. Not Having a Team

Having a good divorce team is essential, so don’t skimp on your professional assistance. The IDFA considers the necessary minimum to be a divorce lawyer and a certified divorce financial analyst (CDFA), while noting that other possible members could be a mediator, an accountant, a business or pension valuator, and a child or individual therapist.

The IDFA advises that having the right assortment of pros to help you can actually reduce the cost of litigation while averting expensive mistakes you might make on your own. Of course, be certain to do your due diligence first before signing them up.

How Does Getting Divorced Affect Social Security Limits?

If you are age 62 or older and divorced from a spouse who is entitled to Social Security retirement benefits, you may be still able to receive benefits based on their records, if you meet certain requirements.

How Can You Protect Your Pension When Divorcing?

A pension earned by one spouse is looked at as a joint asset. This means your spouse may be entitled to half of it after divorce. You can protect your pension by reviewing your pension plan’s rules for how to divide the pension, propose financial alternatives to splitting your pension with your spouse, and, as always, talk to a certified financial advisor who specializes in divorce.

How Does Divorce Affect Your Life Insurance?

When you get divorced, it is likely you will want to remove your ex-spouse’s name as the primary beneficiary of a life insurance policy. If your policy is revocable, you can simply change the name. If your policy has a cash value, you may have to split the monetary value of the policy.

How Does a Prenup Affect a Divorce?

A prenuptial agreement usually outlines the distribution of assets so that in the event of a divorce, couples can avoid fighting over them. A prenup contract lists each spouse’s property and assets and states how everything will be treated in the event of a divorce. A prenup may also outline how you will agree to split up financial assets.

The Bottom Line

Divorce rates are dropping for people in most age groups. But for people over 50, the divorce rate is much higher than it is for married people who are younger. Although divorce can be devastating at any age, there are several mistakes you can avoid to save yourself from financial heartbreak in the future. A good place to start is by making sure you list your assets and your debts, disclosing all your assets to your spouse, and ensuring that you’re covered with health insurance.