Grey divorce and retirement planning: What you need to know

When it comes to grey divorce and retirement planning, there are several things you need to consider as you move into this new chapter of your life. Ella Hickman from Hickman Family Lawyers in Perth shares her insights into what you need to know about grey divorce and retirement planning.

What Is A Grey Divorce?

Grey divorce is the term used for divorces of people generally over the age of 50 years. In most cases, divorce can be a most painful and distressful event for people of all age groups, but for the over 50s, it can come with an extra set of challenges.

Apart from the emotional aspects and the daunting task of drawing up divorce papers and planning how and where one would live, there could also be health issues or physical challenges that older divorcees may have to contend with. And then, of course, there are also considerable future financial implications that have a huge effect on most grey divorces.

What Are The Financial Implications Of Grey Divorce?

Although much depends on the financial position of each couple, after assets and incomes are split in two, there is often bound to be a drop in living standards for both spouses. They may be close to or already in retirement, which means there is little or no time left for either of them to start earning all over again.  

The financial implications vary with each case, but in many grey divorces, both spouses may have little choice but to learn to make do with a lot less.

How Is Retirement Planning Affected By Grey Divorce?

Unless a couple going through a grey divorce has managed to build up a healthy nest egg during their married lives, their retirement planning can be affected in numerous ways.

• Joint plans and funds now become individual, falling short of what is required to maintain a similar lifestyle to what they were accustomed to while being married.
• Lack of time to rebuild sufficient retirement funds for one or both parties.
• If one spouse is the main earner, the other spouse becomes potentially disadvantaged financially.
• Future lifestyle expectations are likely to change for both spouses.
• Many choose to sell the family home to liquidate assets rather than one person keeping a property they potentially cannot afford to maintain.
• The division of properties, especially the family home and superannuation, which are usually the most valuable assets, become a huge concern and points of dispute in many grey divorces.
• The financial literacy of each person can affect outcomes. If your spouse handled all financial matters in the past, it’s time to start learning to do that for yourself.
• Make provisions for the protection of future inheritances, especially if one or both people remarry.

All of these challenges make grey divorces a most daunting and emotionally-charged task, often requiring the assistance of a professional financial planner and experienced family lawyer to overcome.

How To Maximise Your Retirement Planning And Superannuation After Grey Divorce

Before you can begin to replan your retirement, you need to take financial stock of your situation as soon as possible. Below are a few tips on maximising your retirement planning and potentially making your life a little more financially comfortable.

• Consider additional income streams to add to your savings and super.
• If you’re able, consider working beyond your planned retirement age. Going back to work may also help to give your life more purpose boosting your confidence.
• Adjust your lifestyle expectations by reducing expenses where you can and avoid getting into any further debt.
• Get advice about cancelling any joint bank accounts and opening new ones in your name.
• Ensure you have enough available money on hand to meet your monthly bills and your upcoming divorce.
• Reconsider your retirement goals.
• Investigate state pension income as a single person as opposed to a couple and work out what level of private superannuation you would need to retire at a level you would be comfortable with.
• Consider selling and downsizing instead of fighting to keep the family home which you may not be able to afford in the long run.
• If buying another property, consider an income-generating property, where you could rent out certain portions for additional income.
• Sell unwanted assets.
• Review your power of attorney and current will to ensure your assets go to your preferred beneficiaries when you pass on. 
• Review your insurance policies, including health insurance, to ensure they meet the new demands in your life. Seek advice from various insurance companies to find the best suited to your specific needs.
• Reach your property settlement as quickly as possible – the sooner you can settle, the sooner you can plan your future and move on financially.
• Save money by seeking an amicable divorce and by choosing the quickest and least costly divorce process.