While the U.S. divorce rate has been going down over the past several years, some specific demographics have been experiencing increases. For those over the age of 50, the rate of divorce has doubled in the last 26 years. Since people over age 50 are nearer to retirement, they may want to consider some unique financial factors before filing for divorce.
It is important for potential divorcees to understand that many things, such as insurance, cost more for single people than they do for individual people who are married. Before filing for divorce, seniors should understand what their spending habits are and determine how much money they will need after the separation. For example, they might want to consider selling the family home instead of staying in it. If a divorcee does wish to keep the home, they should know for sure that they will be able to afford it in the long-term.
Senior divorcees should also learn about the tax implications of different types of property distributions. For example, money in brokerage accounts will be taxed at capital gains rates while money in retirement accounts on a pre-tax basis will be taxed at income tax rates. This means that the brokerage account money will incur lower taxes.
Individuals might want to consult with an attorney before they file for divorce. A lawyer may help the client determine whether the timing is right for a potentially costly separation. The attorney could also negotiate a settlement agreement for asset division that protects the client’s financial security.