Divorce After 50: Why an Equal Settlement May Not Leave You Financially Equal

Divorce after 50 comes with a different set of financial questions.

Sometimes these divorces are contentious, but certainly not always. I work with couples ending long marriages who are actually very amicable. They aren’t looking for a fight. They want to understand what they have, divide it in a way they both feel comfortable with and move on with their lives.

The challenge is that after 20, 25 or 30 years together, there can be a lot to unwind.

There may be a house with substantial equity, 401(k)s, pensions, IRAs, investments, restricted stock or stock options. One spouse may be approaching retirement while the other spent years out of the workforce raising children. Health insurance may be changing. Medicare may be around the corner. And instead of one household supported by the family’s assets and income, there will now be two.

So when I’m looking at a settlement in a long-term marriage, I’m not only interested in whether each person received the same dollar amount.

I want to know what those dollars actually look like in real life.

When One Spouse Hasn’t Been Handling the Finances

This is something I see often in longer marriages.

One spouse built a career and handled most of the investments, retirement accounts and employee benefits. The other may have stayed home while the children were young, worked part-time or stepped in and out of the workforce.

That doesn’t mean one person was better with money. It means they had different jobs within the marriage.

The problem is that divorce suddenly requires both people to understand financial information that one of them may barely have looked at before.

I frequently hear things like:

“I know there’s a pension, but I don’t know anything about it.”

“He has company stock, but I have no idea how it works.”

“I think we have more than one retirement account.”

Or simply:

“I don’t even know what I should be asking for.”

That’s where I start.

Before we talk about who should receive what, we need to know what actually exists.

Financial Discovery Doesn’t Mean Asking for Everything

There can be a tendency in divorce to request mountains of financial documents because someone isn’t sure what they need.

More isn’t always better.

I want the documents that answer the questions we’re trying to answer.

For example, today’s 401(k) statement tells me the current balance. If part of that account existed before the marriage, I may need historical information.

A brokerage statement showing vested company shares may not tell me whether there are additional RSUs or stock options that haven’t vested yet.

And a pension estimate showing a monthly benefit may not give us everything we need to understand the marital portion, survivor options or what happens when the employee actually retires.

Depending on the case, I may need retirement statements, pension information, stock grant and vesting records, tax returns, bank and brokerage statements, mortgage records or insurance information.

I’m not collecting documents just to collect them.

I want to know what we’re trying to determine and then get the records necessary to determine it.

$750,000 Doesn’t Always Equal $750,000

This is where settlements can become misleading.

Let’s say each spouse receives $750,000.

One receives $500,000 of home equity and $250,000 in retirement assets.

The other receives $750,000 primarily in retirement and investment accounts.

The spreadsheet may say they each received $750,000.

That doesn’t tell me nearly enough.

How much of each settlement is actually available to spend?

What taxes will eventually be due?

Will those assets produce income?

How much does the house cost every month to maintain?

Does either person have enough accessible cash?

A dollar in a checking account, a dollar of home equity and a dollar in a traditional 401(k) may all be worth a dollar on today’s balance sheet. That doesn’t mean they’ll put the same amount of money in your pocket when you need it.

You Can Have Plenty of Assets and Not Enough Cash

This is one of the things I really want clients to understand.

You can leave a divorce with a very healthy net worth and still be cash-flow poor.

Maybe you have a beautiful house with substantial equity and several hundred thousand dollars in retirement accounts.

That’s wonderful on a net-worth statement.

But you still need money every month for the mortgage, property taxes, insurance, utilities, groceries, your car, healthcare and everything else that comes with ordinary life.

The electric company doesn’t care how much equity you have in your house.

And your retirement account isn’t necessarily money you want — or are able — to start pulling from every month.

This is why I like to model settlement options beyond the date of divorce.

What does year one look like?

What about year five or ten?

What happens when spousal maintenance ends?

What changes at retirement?

When does Social Security enter the picture?

What happens when retirement accounts start being used for income?

Sometimes two settlements that look almost identical today look very different several years from now.

I’d much rather know that before an agreement is signed.

Keeping the House Needs More Than an Equity Calculation

The house is often one of the hardest decisions in a long-term divorce.

I understand why.

It may be the home where you raised your children and spent 20 years of your life. Keeping it can feel like holding onto some stability when everything else is changing.

But wanting the house and being able to comfortably keep the house are two different questions.

I spent more than 30 years in mortgage lending before specializing in divorce finances, so this is an area I look at particularly closely.

If you’re keeping the house, what will the actual monthly cost be?

Can you qualify for a refinance if one is required?

What happens to the payment?

Property taxes?

Insurance?

HOA dues?

Repairs and maintenance?

And how much of your overall settlement are you putting into an asset that doesn’t give you monthly cash flow?

Sometimes keeping the house works perfectly well.

Sometimes the numbers say otherwise.

I’m not there to tell someone whether they should keep it. I want them to see what keeping it really looks like financially so they can make that decision with their eyes open.

A Pension, 401(k) and Company Stock Aren’t the Same Thing

Long marriages can accumulate a surprising number of retirement and employment benefits.

There may be 401(k)s, IRAs, pensions, deferred compensation, RSUs and stock options.

They aren’t interchangeable just because we can assign each of them a value.

A traditional retirement account generally has taxes to consider when the money eventually comes out.

A pension may provide a monthly income stream rather than an account balance.

Pensions can also have survivor-benefit provisions that need to be understood.

Company stock can get even more complicated.

RSUs and stock options may have different grant dates and vesting schedules. Some may have been earned entirely during the marriage. Others may involve employment before the marriage or continue vesting after the divorce process begins.

That’s why sometimes a current account statement is enough and sometimes it isn’t.

The asset tells us what documents we need.

Don’t Forget About Taxes

Taxes aren’t very exciting until they cost you money.

Two assets with the same current value can have very different tax consequences.

Cash is different from a tax-deferred retirement account.

A retirement account is different from highly appreciated stock.

And both are different from equity in a home.

That doesn’t automatically make one better than another. It just means we should understand what each asset is actually worth to the person receiving it and how it fits into the rest of the settlement.

This is one reason I don’t like looking only at the two columns at the bottom of a marital balance sheet.

The columns can match perfectly while the financial outcomes don’t.

Health Insurance Can Become a Big Expense Very Quickly

Health insurance deserves particular attention in divorce after 50.

If one spouse has been covered through the other’s employer for years, that coverage may not continue after the divorce.

At 58 or 61, Medicare isn’t available yet. That can leave several years of health-insurance costs that need to be included in the post-divorce budget.

Someone closer to Medicare eligibility has a different set of decisions.

And existing health concerns matter.

If someone has ongoing medical treatment, expensive prescriptions or other health needs, I want those costs reflected in the analysis. A settlement that comfortably supports one person’s lifestyle may not provide the same security for someone with significant healthcare expenses.

These aren’t side issues.

They’re part of figuring out what life is actually going to cost.

What Happens to Support if the Paying Spouse Dies?

This is one people sometimes don’t think about until I ask.

If part of your post-divorce income will come from spousal maintenance, what happens if the person paying it dies?

Life insurance may sometimes be considered as a way to protect a support obligation, depending on the agreement and applicable law.

But saying “We’ll use life insurance” isn’t enough.

Does a policy already exist?

Is it through an employer or privately owned?

Who owns it?

Who is the beneficiary?

How much coverage is actually needed and for how long?

What happens to employer coverage when someone retires?

And if the plan involves buying a new policy, can that person actually qualify for one?

That last question becomes much more important in your 50s and 60s.

I don’t want to discover after everything has been negotiated that the protection everyone assumed would be available isn’t.

Social Security Belongs in the Conversation Too

Social Security isn’t an asset we’re putting on the marital balance sheet and dividing.

But it can matter quite a bit when we’re looking at future income.

Depending on the length of the marriage and other eligibility requirements, someone may eventually qualify for divorced-spouse benefits based on a former spouse’s earnings record. Survivor benefits can also come into play.

The specific rules matter, and claiming strategies are individual.

For my purposes, Social Security is another piece of the larger question:

Where will your income come from after divorce and as you move into retirement?

At 55, You Don’t Have the Same Financial Runway You Had at 35

This is probably the simplest way I can explain why gray divorce deserves a different kind of financial analysis.

At 35, you may have another 25 or 30 years of career earnings ahead of you.

At 55 or 65, you don’t.

The spouse who has been working may be thinking about retiring soon.

The spouse who spent significant time outside the workforce may return to work, but it may not be realistic to assume that person can suddenly replace the income of someone who spent 30 years building a career.

Retirement accounts may soon become income.

A pension may begin.

Social Security and Medicare start entering the picture.

And eventually spousal maintenance may end.

All of those things can change the financial picture.

That’s why I don’t want to know only whether the settlement works today.

I want to know whether it still works when some of those things change.

If You Don’t Know Where to Start, Start Here

You do not need to become a financial expert before you begin your divorce.

You do need to start understanding what you have.

That generally means identifying information in several areas:

• Income and employment benefits

• Bank and investment accounts

• Retirement accounts and pensions

• RSUs, stock options and other employer equity

• Real estate and mortgages

• Debts

• Tax returns and tax information

• Life insurance

• Health insurance

• Estate and beneficiary information

You may not need every document in every category.

That’s the point.

Financial discovery should be driven by what you actually own and what questions need to be answered.

What Does “Fair” Actually Look Like After a Long Marriage?

Sometimes an equal division really does make sense.

But I don’t think the analysis should stop because the two columns match.

I want to know whether each person has enough cash flow.

Whether the tax differences have been considered.

Whether the housing decision is sustainable.

What retirement looks like.

What happens when maintenance ends.

How healthcare will be paid for.

And whether there are financial risks we can identify now instead of discovering them later.

Sometimes I do this work as one person’s CDFA®, alongside that person’s attorney.

Other times I work as the financial neutral for a couple who wants to understand their options together and make their own decisions.

In either role, I’m not deciding what is legally fair or telling someone what settlement they should accept.

I’m showing them what the numbers mean.

Because after a 20- or 30-year marriage, I don’t think knowing that you received 50% is enough.

You need to understand what your 50% is actually going to do for you.