The divorce rate for older Americans has roughly doubled since the 1990s, according to a 2017 analysis from the Pew Research Center. Divorce can have massive financial implications at any age, but for older divorcees, who may have more wealth and more complicated finances, particularly when it comes to insurance.
Why are older Americans divorcing?
The rising divorce rate among adults 50 and older can largely be credited to the Baby Boomers, who ranged in age from 51 to 69 at the time of the Pew analysis. This group had already experienced high rates of divorce during young adulthood. Many Boomers are living well into their 80s and 90s. Though American life expectancy has stalled in recent years, the average life span increased dramatically over the 20th century, from around 50 in 1900 to nearly 80 today. [1]
“If you feel at 55 or 60 that you have 30 years left, do you really want to stay with a person that you’ve fallen out of love with, or you’re bored, or one of you is getting sick?” asks Pepper Schwartz, a professor emeritus of sociology at the University of Washington.
Baby Boomers in particular have higher expectations of marriage, and have been more willing to get out of relationships that don’t meet them.
“They all had the model of parents who didn’t like each other a whole lot,” Schwartz says.
How divorce affects your finances & vice versa
The Baby Boomers were one of the first generations in which many women earned incomes alongside their husbands. Because of that, many women may have enough resources by the time they reach their 50s to split up while being able to afford life on their own. But if that’s not the case, divorce can have devastating financial consequences, including on your housing and insurance. Many people need two incomes to afford their lifestyles, Schwartz says. “If a marriage breaks up, even for good reasons, it can put people in a tailspin.”
Insurance moves to make after a gray divorce
Divorce can be complicated, and one big reason is that you have to untangle your finances, including your insurance plans, from your former partner. That’s why it’s a good idea to conduct a full comprehensive review during the divorce process.
“Many individuals simply keep their existing policies in place without considering if they still need the coverage or if the existing coverage is enough, given the new set of circumstances,” says Susan Mitcheltree, a certified financial planner, certified divorce financial analyst, and partner with Berman McAleer, a wealth management firm based in Maryland.
Here are the five simple insurance steps gray divorcees should consider.
1. Update your beneficiaries
One of the first steps to take, even before the divorce is finalized, is to change the beneficiaries on your life insurance and any other accounts that previously benefited your partner in the event of your death, like brokerage accounts. Life insurance policies will pay out to the named beneficiary even in the event of a divorce, so if you don’t remove your former spouse, they’ll get the death benefit.
Older divorcees have the option of naming any grown children as beneficiaries, something that’s less advisable with minor children since they won’t have access to the money right away.
In some cases, a judge will even order you to buy life insurance as part of a divorce settlement, to ensure there’s a level of financial support even after you die.
“It’s a way of making sure, for example, that alimony would continue to be paid,” says Sara Stolberg Berkowicz, a certified divorce financial analyst, certified financial planner, and chair of the advisor development department at the College of Financial Planning.
Alternatively, you may be able to cancel your life insurance if no one depends on your income after divorce, says Mitchell Kraus, certified financial planner and founder of Capital Intelligence Associates.
You should also drop coverage for any vehicles, homes, or possessions that no longer belong to you, and remove your ex from any active auto insurance policies. “Anything that is no longer owned by you should be removed,” Mitcheltree says.
2. Make sure you’re still covered by health insurance
Health insurance could be another difficult consideration for people who previously got their coverage through a spouse. Many health insurance plans, including those on the individual marketplaces, charge higher premiums to older people. Divorce is a qualifying event for COBRA, which can allow you to stay on your previous health plan. That’s an expensive option, but for older divorcees, you only need to stay covered until you reach Medicare age, says Berkowicz.
3. Update your health care proxies
An oft-overlooked move is to update your health care proxies (also known as a durable medical power of attorney). Your health care proxy is someone appointed to make health care decisions on your behalf if you’re terminally ill or mentally incapacitated. If you don’t want your ex to make those decisions, you have to update these documents — health care providers won’t be aware of who to turn to otherwise.
“Hospital administrators aren’t going to get involved in somebody’s personal business,” Berkowicz says. “That’s why these documents are really important.”
4. Consider disability or long-term care insurance
It’s even more important to protect your income when you become single — there’s no one else to lean on if you’re unable to work. That’s why disability insurance, which pays out if you’re too sick or injured to work, is worth considering.
“It is also common for spouses to care for one another as they age,” Mitcheltree says. “As a single person, ensuring you have a plan for your own long-term care needs, which can take the form of many options, including long-term care insurance, is smart financial planning.”
5. Make sure your assets last
A divorce, especially later in life, can reshape your finances for better or worse. Some people will end up flush with cash, while others will have to more carefully manage their wealth. Either way, you’ll need a new financial plan for your new financial situation, and it can be useful to get help in the form of a financial advisor.
“It is very important to work with a professional here who can help you make wise decisions in managing this wealth toward your income needs and personal financial goals,” Mitcheltree says.
Image: The Good Brigade / Getty
