Gray Divorce: What Financial Factors to Consider
Divorce can be a reality for some couples. When going through this process, there will be financial consideration to address i.e. primary residence, joint assets, alimony etc. Getting divorced while retired or when approaching retirement can bring about a new set of financial considerations. Below are some situations to be aware of:
If a marriage has lasted at least 10 years, you may be eligible to receive benefits based on the ex-spouse’s earnings record. There are a few caveats to keep in mind when applying for Social Security benefits based on the ex-spouse’s record:
- Must be age 62 or older
- You have not remarried (Otherwise, the new spouse will take the ex-spouse’s place)
- The ex-spouse is eligible to collect Social Security
Another thing to keep in mind is that there is a two-year waiting period after the divorce occurs before you can collect ex-spousal benefits.
Assuming the divorce occurs before a person reaches Medicare age, health insurance will be a financial consideration to address. If you had coverage through the spouse’s employer, you can continue the same level of coverage through COBRA for 36 months. One should keep in mind that COBRA will cause insurance premiums to increase, as the employer, not just the employee portion of the premium will have to be paid.
Married couples usually tend to acquire “shared benefit” long-term care policies. This type of policy provides the married couple with a pool of benefits to split between each. For example, if a couple were to acquire a three-year benefit for each spouse, under a shared benefit policy, one spouse could effectively have six years of benefits if the other spouse does not use any of their allocated pool of benefits.
This type of policy will have to be reviewed in the event of a divorce. Depending on the insurance provider, shared benefit policies can have the option to keep this policy as it is or the option to exchange it for two individual policies. Exchanging it for two individual policies, however, may increase the premium.
While divorce can be a lengthy and possibly complicated process, one should take the time to carefully analyze all the potential financial implications. Consulting with a fee-only financial advisor during this pivotal process can help with the transition.
Weingarten Associates is an independent, fee-only Registered Investment Advisor in Lawrenceville, New Jersey serving Princeton, NJ as well as the Greater Mercer County/Bucks County region. We make a difference in the lives of our clients by providing them with exceptional financial planning, investment management, and tax advice.