Divorcing After 50: Unique Challenges for Older Couples
Often called “gray divorce,” ending a marriage after 50 is a decision that comes with unique emotional and practical complexities.
One area of particular complexity is the financial side of married life. Although every family manages money in its own way, divorce after 50 can mean carefully disentangling decades-long connections, ranging from retirement accounts and real estate to healthcare and estate planning.
Whether you’re just beginning to consider divorce or are already in the process, this guide offers actionable strategies to help you confidently take the next steps.
Financial considerations for older divorcing couples
After years of marriage, you may have accumulated shared assets, purchased property, or jointly shouldered financial responsibilities. Long-term benefits like pension plans and Social Security eligibility—which can be claimed based on your ex-spouse’s work record if you were married for at least 10 years—become critical factors in post-divorce financial planning.
Unlike younger couples, divorcing couples over the age of 50 have less time to rebuild individual wealth, making strategic financial negotiations essential. Here are the key financial issues to consider.
Division of assets and retirement accounts
For many couples over 50, financial security is closely tied to retirement savings and investments. Dividing these assets—especially with retirement on the horizon—can be daunting.
For example, tax-deferred accounts like 401(k)s and pensions require careful handling.
Dividing these funds without a well-planned approach can lead to financial setbacks, including significant tax penalties. These issues can hamper the long-term growth of retirement accounts or even deplete assets that might be needed for future healthcare or living expenses.
This is where an experienced divorce attorney is invaluable. They don’t just look at which assets are marital and which aren’t—they can help you navigate the intricate rules governing retirement account division to ensure your settlement is fair and avoids financial complications.
A Qualified Domestic Relations Order (QDRO) is an essential tool in this process. This legal document allows for:
- The division of employer-sponsored retirement plans without triggering taxes or penalties, as long as funds are transferred into an eligible retirement account
- Coordination with financial professionals to manage tax implications
- Compliance with New Jersey’s equitable distribution laws
Impact on the ability to retire
Divorcing later in life can bring significant changes to your financial outlook, particularly when it comes to retirement.
With less time to rebuild savings, strategic financial planning is essential to achieving retirement goals. While this can be worrying, it’s important to focus on solutions.
Before making any major financial decisions, ask yourself the following questions:
- Do you need to adjust your timeline? If your retirement accounts are divided, you may need to postpone retirement by several years to rebuild savings and regain financial security.
- What can you do to maximize your Social Security benefits? If your marriage lasted at least 10 years, you may be eligible to claim up to 50% of your ex-spouse’s Social Security benefit without reducing their payout, providing an additional financial cushion.
- How can you prepare for long-term care costs? If Medicaid may be part of your future healthcare plan, strategic asset transfers—completed at least five years before applying—can help preserve eligibility while protecting personal assets.
Carefully assessing your financial position post-divorce can help ensure you remain on track for a stable retirement.
Tax issues for gray divorce
Divorce doesn’t just affect your daily financial life—it also has significant tax consequences.
From alimony payments to real estate transactions, the changes in your financial circumstances can lead to new tax obligations. Understanding these implications—and planning for them—can help you make informed decisions and avoid unexpected liabilities.
Some key considerations include:
- Alimony and taxation: Under the post-2019 Tax Cuts and Jobs Act (TCJA), alimony payments are no longer tax-deductible for the paying spouse. Nor are they considered taxable income for the recipient. This shift may change how you approach alimony during divorce negotiations and the overall structure of your settlement.
- Tax credits for adult dependents: If you financially support a college-aged child or have an adult child with special needs, remember that only one parent can claim the dependency exemption each year. Additionally, the American Opportunity Tax Credit (worth up to $2,500 per year) can only be claimed by one parent. Coordinating with your ex-spouse can help maximize tax benefits.
- Capital gains tax on property sales: If you plan to sell your marital home as part of your divorce, capital gains tax will apply to appreciation since the original purchase. However, if the house was your primary residence for at least two of the past five years, you may qualify for a $250,000 capital gains exclusion ($500,000 if selling jointly before the divorce is finalized).
Given these potential tax implications, consulting a financial professional or tax advisor is often advisable. These professionals can work with your attorney and guide you on structuring your settlement to minimize liabilities and maximize financial stability.
Health insurance and medical care concerns
Losing access to a spouse’s health insurance is a significant concern for many individuals going through divorce, particularly those nearing retirement age and facing age-related health concerns.
These costs can be significant, but understanding your options will help you maintain coverage and minimize unnecessary expenses.
Here’s what you need to know about post-divorce healthcare coverage:
- COBRA coverage: If your spouse had employer-sponsored insurance, you may be eligible for COBRA benefits, which extend coverage for up to 36 months (though at full cost).
- Medicare eligibility: If you’re 65 or older and were married for at least 10 years, you may qualify for premium-free Medicare Part A based on your ex-spouse’s work history, potentially reducing out-of-pocket costs.
- Affordable Care Act (ACA) plans: If your income is within 400% of the federal poverty level, you may qualify for subsidized health plans through the ACA marketplace, providing a more affordable alternative to private insurance.
Beyond finding coverage, healthcare costs represent a major expense, especially as you grow older.
Without the shared financial structure of marriage, budgeting for medical expenses—including premiums, prescriptions, and long-term care—becomes a key part of your post-divorce finances. Your attorney can help you factor these costs into your settlement to protect your long-term stability and prevent unexpected financial hardship.
Consult with an experienced New Jersey divorce attorney
From asset division to retirement adjustments, an experienced family law attorney can guide you through the tough decisions.
At Dughi, Hewit & Domalewski, our experienced family law team is dedicated to ensuring that clients feel supported at every turn. Let’s get to work on your case—schedule a consultation today.
