The Worst Retirement Move You Can Make
Life + Money

The Worst Retirement Move You Can Make

The Fiscal Times/iStockphoto

Theresa Martin was married for 40 years. She says her husband suffered from alcoholism, but because she was a stay-at-home mom and feared she couldn’t survive on her own, she stayed in the marriage, always holding on to the hope that he would stop drinking. But by Thanksgiving 2006, after he had retired from his job as an architect, she says he became verbally abusive in front of her son, and she decided she’d had enough. She left him at the age of 65.

Martin is part of a growing trend of people leaving marriages late in life. At a time when the divorce rate in general has remained stable, divorce among people over the age of 50 has doubled, from 4.67 percent of divorces in 1990 to 9.74 percent, in 2009, according to census data. That adds up to 600,000 Americans over 50 who divorced in 2009.

Lisa Helfend Meyer, a family lawyer at Meyer, Olson, Lowy & Meyers in Los Angeles, says at least 25 percent of her divorce clients are retired couples. Ten years ago, that figure was about 5 percent. “As baby boomers, we’ve always learned the concept of immediate gratification. If a marriage turns sour, people aren’t willing to work on their issues,” she says.

The problem with getting divorced late in life, though, is that most people save enough for retirement and don’t imagine living off of just half of it. “It’s not a pretty picture,” says Helfend Meyer.

“Divorcing as an elderly person
is about the worst financial
decision you could make”

Sharyn Maggio, a forensic accountant in Eatontown, New Jersey whose focus is divorce cases, says if a couple had money in the marriage, there will be money to go around in the divorce -- even if the couple is retired. The challenge is for normal middle-class couples who just scraped by. When they try to make their house and retirement assets cover two households instead of one, there’s simply not enough to go around. And for people in their sixties or seventies, possibly with medical issues, they’re not likely to go back to work.

When people are relying on a pension or Social Security, there’s never going to be enough to duplicate the marital lifestyle, Maggio says. “At least if you’re not in retirement you get a shot at working hard, putting in a few more years, and getting back to where you were. At 65, you’re too old to recover,” she said.

It doesn’t help that the most valuable asset people have is often the marital home, and these days, either its value has dropped, it can’t be sold, or it’s just too difficult to value, if one partner wants to buy the other out.

Rather than divorce, the better option at this age, says Lisa Marie Vari, a divorce attorney with offices in Pittsburgh and Miami, is to live in separate houses and come up with a separation agreement. It’s not as catastrophic on the finances, she says.

“For people of average or lower income in retirement, divorcing as an elderly person is about the worst financial decision you could make,” Vari says.

If they do decide to divorce, she strongly recommends trying to settle such cases out of court. For instance in California, there are about a dozen factors that a court can take into consideration when making an award of support: what is everyone’s income and what will it look like divvied up. If there’s a disparity between the two, there’s likely going to be an alimony obligation. And if you’re married for more than 10 years, the rule of thumb is that spousal support continues until death or the receiver of the support remarries. That can be a problem for someone who’s living on retirement income.

Divorcing after retirement? Here are 7 tips to facilitate the process:

1. Protect your assets early on. If you’re marrying near retirement age, enter into a pre-nuptial agreement. If you’re already married, enter into a post-nuptial. If possible, keep assets and inheritances in the name of party who brought them to the marriage. 

2. Separate but equal. If the values are somewhat similar, let one party have the house while the other gets the retirement plan.

3. Be flexible. Take a lump sum instead of receiving monthly support payments. You may wind up with a lesser amount, but you will be guaranteed that amount. Monthly support payments, on the other hand, could stop if income dries up.

4. Try to settle the case out of court. That way, the parties can come up with creative solutions rather than being bound by state divorce laws.

5. Wait a few years. If you’re younger than retirement age, the courts could base spousal support on your “earning capacity” before you retired. But if you’re in the 62 to 65 age range, they’ll be less likely to do so, says Vari. “I think the courts generally agree everyone has a right to retire at some point and that you don’t have to work until death do us part.”

6. Prepare for the worst. Although the conversation is difficult, try to determine what will happen if one partner dies before the divorce is finalized. If one of the parties has a pension and elected for just themselves to be paid and the person dies, those benefits would be lost. “One of the biggest assets of a divorce could be eliminated if the party with the pension dies,” says Vari. “Does it happen often? No, but when it does, it’s traumatic.”

7. Stay married on paper. Vari advises those who walk in the door of her practice to stay married and wait until their partner dies. “But they don’t listen,” she says. “By the time they’ve made it through our door, they’re so stubborn, they’ve already decided what they want to do.”

Susan Brown, co-director of the National Center for Marriage Research at Bowling Green State University, says about half the 600,000 Americans over 50 who divorced in 2009 had been married before. That’s because many of them are baby boomers, who came of age during the late seventies and early eighties when divorce rates were high. “It’s a function of the changing marital composition,” she says. “More older people today are in remarriages, which places them at a higher risk of divorce.”

66 percent of those surveyed
between ages 40 to 79 said the
divorce was initiated by the wife

The baby-boom generation has shocked everyone with how accepting it is of divorce, says Janice L. Green, a family law attorney with Farris & Green in Austin, Texas. “We are told over and over again that we’re a ‘can-do’ generation, and we’ve seen life span extend, so people in their sixties and seventies with better health expectations figure they have a number of good years left. Why not live them to the fullest?” Green says.

Interestingly, most of those trying to live life to the fullest are women, according to a 2004 study by AARP. The association surveyed 1,147 people who were between 40 through 79 years of age, and 66 percent of those surveyed said the divorce was initiated by the wife.

I hear things from women like, “I could have 35 to 40 years left. I’m not going to do it with him anymore. I’m tired of being the caretaker,” says Sharon Gilchrest O’Neill, author of A Short Guide to a Happy Marriage.

Many stay-at-home mothers who hung in there for the children are now in their early sixties and want to spread their wings. “They’re saying I don’t want the responsibility of having to do anything for anybody anymore,” O’Neill says. “ I don’t want to have sex. I don’t want to make dinner. I don’t want to do anything but take care of myself.”