Understanding the Financial Impact of ‘Gray Divorce’

Critical Considerations for this Challenging Life Transition

Whether you’ve been anticipating it for years, find yourself completely blindsided, or you’re somewhere in between, divorce impacts every aspect of your life. This includes your finances, which can cause a great deal of anxiety and stress. The financial impact of a relationship ending can be particularly impactful in cases of “gray divorce” – when two people aged 50 or over end a marriage – because retirement is near. And, though divorce may not have been in your retirement plans, understanding the multitude of financial considerations is helpful as you navigate this life transition.

In this article, we’ll detail the financial elements to be aware of and offer guidance as you move forward through a gray divorce.

Gray Divorce and Your Finances

What comes to mind first when you think of the financial consequences of gray divorce? Many people focus on the up-front costs associated with legal assistance. However, there are more obscure and long-term considerations, too, and we’ll review a few of the most common here:

Financial Accounts

Data from a Federal Reserve study in 2019 indicated that families with at least one spouse or partner over the age of 55 had an average of $1 million in assets. That’s quite a lot to sort through, and it’s best not to rush. You’ll need to determine a fair and equitable way to split funds in checking and savings accounts, and in retirement accounts, too. Sometimes, it’s wise to freeze all accounts until a legal agreement is in place.

It could be simple depending on how your retirement accounts are set up. For example, if you each contributed to your own IRA, always singularly and never collectively, it will likely be considered individual property. Of course, it’s often more complex than that. Many IRAs are considered marital property, and a spouse may also be entitled to some 401(k) and 403(b) funds, even if their name is not on the account.

After the dust settles, remember to change beneficiaries on your accounts or remove authorized users if need be.

Real Estate

Real estate assets include your primary residence, but also any rental properties, vacation homes, or timeshares. These can all be challenging to split in the midst of a gray divorce because real estate often isn’t as liquid as other assets like your checking account. Some divorcing couples with more than one property simply decide who keeps which one. Other times, it’s most equitable to hire an appraiser, determine your equity in each property, then sell them and split the proceeds.

As you go through the gray divorce process, consider the role real estate might play in your financial recovery. Could you purchase an income-generating property with proceeds from the divorce, for instance?


Keep in mind that every state has its own laws related to annuities, and your annuity contract might also list specific regulations. However, your options are generally to withdraw the funds, transfer the funds to each person’s IRA, transfer ownership, or use the dividend funds to start a new contract.

If you’re entering a gray divorce with an annuity you owned before the marriage and neither party contributed to it during the time you were married, it will likely be considered individual property. This means the funds won’t need to be split.

Long-Term Care

Many people navigating gray divorce are already enjoying the later chapters of life, and it’s important not to neglect planning for your future health needs. Long-term care, when needed, can range from $20,000 per year all the way up to more than $100,000 per year and that kind of potential spending certainly requires a plan.

Now, you and your ex-spouse may have planned for long-term care within your retirement plan, but it’s possible that gray divorce has impacted your finances in such a way that long-term care funds won’t be available to you. If that’s the case, consider a new strategy. Many people who are less financially secure after a gray divorce utilize long-term care insurance, life insurance policies with an accelerated death benefit, or reverse mortgages to help them finance long-term care.

Health Insurance

Navigating the process of a gray divorce can drain your energy and motivation. Thinking about complicated health insurance decisions may be the last thing you want to deal with. However, it’s important to make sure you iron out the details as quickly as possible.

If you were covered through your ex-spouse’s employer-sponsored health insurance, you’ll need to do your research and switch to a new plan that suits your needs. You can consult the federal health insurance marketplace to learn more about your options if you won’t have coverage available through work. Medicare will be available to you if you’re 65 or older, but don’t delay. Failing to enroll within eight months of losing your previous insurance means incurring late fees.

Retirement Income and Gray Divorce

This is, perhaps, the most critical piece of the financial puzzle for anyone experiencing gray divorce. If you’re still working, you’ll have to review your retirement timeline and savings strategy. If you were fully dependent on your ex-spouse’s income or you’re already retired, you’ll need to determine where your everyday income will come from – and how much you’ll need to feel financially secure.

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