Divorce Wrecks Wealth

Photo Courtesy of Kevin Dooley

Photo Courtesy of Kevin Dooley

With Valentine’s Day just around the corner it’s a good time to look at the state of the union. Freedom 55 used to mean tossing off the shackles of your job and walking hand-in-hand with your gracefully-aging partner on a deserted beach in Costa Rica. Yet, with escalating divorce rates among seniors, that Viagra-and-Piña-Colada-fuelled fantasy  is overdue for a remake.

So-called “silver divorces,” those among people 55 and older who have typically been married for over 25 years, is rising. Partly this a function of an aging population, as well as increased longevity. In the past, marriages often ended because somebody died (usually the husband). Now with better healthcare and lifestyle habits partners live on and on necessitating remedial measures to address marital dissatisfaction.

But what happens when Boomers’ needs for self-actualization and freedom bump up against this disastrous reality: divorcing later in late is one of the most financially devastating things you can do? Because unless a couple is very well off, splitting assets, as well as paying the costs associated with litigation and moving residences can mean the difference between an okay retirement and one of penury.

It’s understandable why there’s an uptick in divorces among people in their 50s and 60s. For many it’s a time of recovery from decades spent raising a family and working. Suddenly, when a couple is no longer distracted by a revolving list of chores to keep the family unit in shape, they look at one another over breakfast one morning and wonder, “Who is that?”

The cliché was it was usually the husband who was eager to trade in his current wife for a new, younger model. But increasingly, women too are keen to jump ship as they realize that, at 60, they may have 30 more years ahead and can’t face the question, “What are we having for dinner?” one more day.

Postponing sex until you’re a senior doesn’t work so good, neither does postponing divorce.

From a financial perspective, the obvious reason is, whatever expenses were shared by two, are now borne alone. Unless there is a solid-gold pension in one’s future or an in-demand skill for which people will pay handsomely, it’s difficult, if not impossible, to increase income later in life. And, when it comes to the magic of compounding, time is not on the side of the retiree. Those on fixed incomes are not in a position to risk their money in the stock markets. But very conservative investments, like GICs, barely keep pace with inflation, thus constraining nest eggs and reducing buying power.

Not surprisingly, women fare the worst financially after a divorce. This is due to a perfect storm of lower pension payments because of historically lower job earnings, and financial penalties in the form of higher insurance premiums and lower annuity payouts due to their greater longevity. Plus, women pay more for haircuts too.

No one should have to endure an unhappy marriage but being an impoverished senior is no great shakes either. For anyone contemplating “the Great Escape,” it’s best to seize the day well before the Canada Pension cheques roll in, or else “Freedom-55″ might just become “Screwed-at-60.”

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