According to researchers, the rate of Silver Divorce – divorce between spouses aged 50 and above – doubled between 1990 and 2010. After divorce, each partner’s share of marital wealth decreases. Silver divorcees seek financial planners to help develop retirement income plans that reflect their new reality.
Of all the property apportioned in divorce, the marital home may be the most difficult to divide. Jamie Hopkins, Co-Director of The American College New York Life Center for Retirement Income, says dividing the home presents unique challenges because it is the largest asset for many couples, satisfies an essential need of housing, and often at least one of the partners may wish to remain in it after the divorce is final.
This installment of the Silver Divorce blog series provides insights and options for handling the marital home, an issue that frequently occurs with silver divorcees. Guide clients to make smart choices using these approaches:
Counsel clients to detach emotionally
Even clients who understand selling their house is wise can be reluctant to part with their property. In a less than amicable divorce, one partner may want to “win” the house. Some clients need room for grandchildren and pets; others are afraid of being displaced or losing friends in the community. Help your clients examine logistical and/or emotional obstacles to think deeply about priorities.
Show clients the true costs of homeownership
Some older divorcees think they can afford to keep the marital home, but people underestimate the costs of homeownership. Improvements, repairs, taxes – one expert estimates that a homeowner would save $3,250 and earn an additional $3,000 in interest income annually by moving from a $250,000 home to one valued at $150,000. Showing clients a step-by-step analysis of a home’s value and operating costs helps them understand why renting or downsizing may be their wisest strategy.
Consider a reverse mortgage for a client who wants to keep the home
A reverse mortgage provides an upfront lump sum for one spouse to buy the other spouse’s share of the home and covers expenses for the spouse who wants to keep the home but cannot afford mortgage payments. Dr. Wade Pfau, Professor of Retirement Income at The American College of Financial Services, says reverse mortgages can improve retirement income sustainability when used responsibly. Reverse mortgages however are not available to homeowners under the age of 62, so they’re not an option for younger silver divorcees.
Remind women to acknowledge and plan for their unique disadvantages
Some women consider using proceeds from their settlement or alimony to cover homeownership costs. Given their longer life expectancy and average lower lifetime earnings, it’s especially crucial for women to make intelligent financial decisions. Women’s rates of poverty in old age are higher than men’s and a divorce settlement is likely to be the largest lump sum many female clients ever receive. Be reassuring but realistic in such instances and explain why retirement planning is imperative.
Getting the education you need to help silver divorcees
With your help, silver divorcees can begin a new chapter and rebuild their lives after divorce. The Retirement Income Certified Professional® (RICP®) designation from The American College of Financial Services provides advisors with expertise and comprehensive retirement income competencies that help them guide silver divorcees to a fresh start. Learn more now about how earning an RICP® designation can accelerate your success as an advisor with this growing demographic.
Silver divorcees urgently need competent retirement planning advice and guidance. Become their trusted advisor and a successful retirement income planner.
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The rate of silver divorce – divorce among Americans aged 50 and older – has doubled since 1990. There is a significant emotional cost to ending a long term marriage, but splitting later in life...