Michele Singletary, a columnist for the Washington Post, wrote the following column on September 11, 2024. Michelle Singletary is one of my favorite financial gurus as she delves into many of the financial problems that vex us and is very direct about how to help us help ourselves. When I work with my divorcing clients, I mention all that she notes below. Please help yourself!
In Michelle Singletary’s words:
I used to wonder how a couple could be married for decades and then decide to divorce as they approached retirement.
Aside from the emotional toll, there’s the financial impact of splitting the money they set aside for their golden years. In 1990, people 50 and older accounted for 8% of marital splits – a phenomenon known as “gray divorce.” Today, it’s nearly 40%, according to Bowling Green State University’s National Center for Family and Marriage Research.
My husband and I will celebrate 33 years of marriage this year. Baby boomers ourselves, it’s become clearer now how relationships can be tested later in life. If you have children, they may need less of your attention as they move into adulthood. An empty nest can resurface emotions you’ve long buried.
Maybe one of you is retired, and the other isn’t, so there’s friction about how to spend your time. Health issues can strain a marriage.
Maybe it’s the realization that, after 20 or 30 years, you’d rather not spend any more time with a spouse you no longer like or have anything in common with.
Or perhaps one of you can’t stop worrying about spending down the retirement funds, while the other wants to splurge after years of penny-pinching.
That’s the issue over which my husband and I have intense discussions. He retired last year and is eager to enjoy the fruits of our frugality. He’s not a spendthrift and never has been. But he wants to tick off some bucket-list travel experiences that are well within our financial ability. I’ve spent so much of my life being a saver that letting the money go is hard.
“If we don’t spend our money, our kids will,” my husband reminds me.
We have a good marriage and have been working on the issues that frustrate us. We are not headed for a divorce, but I understand better how emotions, separate goals and unresolved issues can tear a couple apart.
If you are facing a breakup at any age, you need a financial exit strategy. Here are some things you should consider.
Get Paperwork in order
If you left money management to your spouse during your marriage, you need to familiarize yourself with your finances. Get a copy of your credit report from the three major credit-reporting bureaus – Equifax, Experian and TransUnion. Go to annualcreditreport.com. Comb through your bank account statements.
Go over your joint tax returns. If money wasn’t your thing, it has to be now.
Be careful emptying joint bank accounts
A divorce means separating your finances, but consult an attorney before you move any money around. You might run into legal trouble rushing to withdraw funds from joint accounts.
Establish credit
You need access to bank and credit accounts in your name. This could ensure that, in a situation where all joint accounts or primary/authorized user accounts are unavailable, you would still have control over at least one line of credit.
Maybe you shouldn’t keep the house
You’ve raised your children in the house. You love the neighborhood and neighbors. It’s been your safe space. You figure it’s a great asset, and that at least one of you should hang on to the home.
But can you afford the mortgage alone? If there is equity, will you have to drain your resources to buy out your ex? Don’t overlook future maintenance costs, repairs, homeowners association fees and other homeownership expenses.
Some spouses may opt to take sole ownership of the house in exchange for giving up any claim to a portion of a spouse’s retirement account. However, this might not be the best move. The retirement account doesn’t come with the same financial obligations.
If you’re divorcing later in life, will you have enough time to build up your own retirement funds? There may be equity in the home, but to tap it, you’ll have to sell or borrow against the house, creating more debt. Don’t make this critical decision based on your emotions.
Responsible for joint debt? Maybe
Many spouses who negotiated to have joint credit card debt paid by their ex are often shocked to learn that the divorce settlement doesn’t change their obligation to pay those liabilities.
Although your divorce agreement might assign a debt to one spouse, that won’t change the contract you have with your creditor, according to Nolo Press, a legal site. For instance, if your ex fails to pay off a joint credit card, the company could come after you for the payment.
Don’t just focus on the finances
You’ve spent decades saving for retirement. Now, whatever retirement money you had expected to live on may end up being divided. This might mean working longer, downsizing your living situation or not traveling as much as you want. While you’re dealing with the legal implications of your breakup, get some emotional support, too. Don’t be so focused on the finances that you neglect to address the toll of your divorce.
Judith F. Sterling, CDFA, CPA is a divorce financial professional practicing in San Francisco, Marin, Mendocino, Napa, and Sonoma Counties. More information in her bio on the “Find A Professional” page.
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