Cheryl Rowling of Morning Star
It is important to go beyond the emotional burden of a “gray divorce” and manage your finances.
The first step is to hire an experienced divorce lawyer. Avoiding legal fees may be appealing, but going without professional guidance can cost more in the long run. Additionally, it is essential to understand the major financial and tax issues associated with a gray divorce.
1) How to budget after divorce
The cash flow you had while you were married supported one household. After a divorce, that available income stream must fund two households. At best, you can expect your income to be cut by half.
Certainly, you need to cover your own personal expenses, but some expenses such as home, insurance, and medical expenses can be over 50% of your marriage expenses.
Start by calculating your spending budget. First, we will itemize fixed costs: rent, car payments, insurance, groceries, utilities, etc. Variable costs such as travel, restaurants, gifts, and more can be adjusted based on available income.
Once your lifestyle becomes more secure after divorce, you can revise that budget.
2) Selling and downsizing the house after divorce
After a later divorce, you may want to leave your family home. This could be a double-edged sword. Maintaining all the fairness of your home means reducing other assets.
Also, the cost of maintaining a large home, assuming that a mortgage can narrow your budget. Do you want to be poor in the house to maintain a housing that may really be too big?
3) Social Security Divorce benefits
If you have been married for at least 10 years, your Social Security benefits will be half the size of your own profit or your ex-spouse’s profit. Certainly, if this makes a difference for you, consider the timing of your grey divorce. For example, if you’ve been married for 9 and a half years, it’s best to delay your final order for six months.
Additionally, if you are approaching 62 (or older), you can take benefits early to either reduce your monthly benefits or increase your monthly profits. Your personal financial situation and life expectancy are the main decision-making factors.
4) Work after divorce
If you’re lacking cash flow, going back to work (or ongoing) might be a good solution. Depending on the shortage, there may not be a need to hold back high levels of full-time jobs.
Many semi-controlled people supplement their income with alternative education, home and dog sitting, and other part-time jobs.
Whether you continue to work as a regular job or pursue something less demanding, there are great benefits to bringing you income. You may be able to delay drawing from your investment.
5) Long-term insurance after divorce
When you are yourself, long-term care coverage is important. This insurance makes it cheaper and easier to get when you’re younger (under 60 years old) and healthy. If you can’t afford a premium, consider opting for a longer wait period of 180 or 360 days. Long-term care payments for six months to one year are easier to handle than covering care for years.
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There are two other options to cover long-term care costs. One may be able to exchange life insurance for a long-term care policy. Second, consider moving to a “continuous care” retirement community. You can choose an independent life similar to having your own apartment. As you get older and need more care, you can move to a living, healthcare, or memory care facility within your community.
This article was provided to the Associated Press by Morningstar. For more personal financial content, visit https://www.morningstar.com/personal-finance
