How 'gray divorce' complicates retirement strategies

Divorce is difficult and its impact on well-being significant during any life stage, but there's an added complexity to "gray divorces" – those that occur later in adulthood among adults aged 50 and older, as defined by the Journals of Gerontology. While marriages are occurring later in adulthood, so are divorces. According to 2022 research from the same journal, more than one in three people divorcing in the U.S. are 50 or older. Despite a general decline in marriage and divorce rates, gray divorce is on the rise, affecting financial circumstances in later life.

This is especially important now as a "silver tsunami" washes over America: 4.1 million adults turn 65 each year between 2024 and 2027, according to 2024 data from the Alliance for Lifetime Income. A 2019 projection by the U.S. Census Bureau suggests that older people will outnumber children by 2034.

Expectations for the golden years have changed. Instead of leaving the labor force altogether, more older Americans are choosing to work in some capacity, prioritizing passions, starting businesses, or working part-time. Couples who have navigated life events, like family formation, loss, disability or job changes, may come back together as pre-retirees and realize they want their respective futures to look different than they originally planned.

This creates an urgent need to respond to demographic trends for employers, the benefit advisers who support them and financial professionals working with individuals and their families. The silver tsunami and gray divorce trends have serious implications for financial strategies, healthcare costs, caregiving, workforce and retirement trends, and healthy aging.

Effective support enables individuals to plan earlier, building solid well-being foundations, growing their portfolios and ensuring adequate insurance. For employers, well-being strategies improve workforce management, productivity and engagement. They also maximize benefit dollars and employee health, especially as trending data show longer expected time horizons in the labor force. For advisers, this amplifies the value of benefit plans and cost savings, providing proactive solutions amid workforce trends and deepening client relationships.

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To understand and respond to this need, it's important for benefit advisers and financial professionals alike to understand why gray divorce is especially difficult to navigate. They also need to become familiar with the groups that require even more support during this difficult time, as well as the impact their action – or inaction – can have on their clients.

Unlike breakups earlier in life, gray divorces occur when couples have accumulated decades of shared assets, mutual social connections and more medical needs, making the separation process more complex. Older adults may have fewer working years to recover from financial losses, combined with factors like caregiving and healthcare expenses. Individuals who experience a marital change – such as a divorce, separation, or death of a spouse – are more likely to withdraw from retirement accounts to cover costs, according to 2017 research from Pew. If a divorce happens during retirement, division can complicate the decumulation strategy, when retirees may depend on their savings for income, social security benefits, long-term care considerations and continuing their health coverage.

Uniquely impacting women's finances
While both men and women experience a 50% drop in wealth following divorce, women's financial wellness takes a harder hit, especially later in life. Women 50 and older experience a 45% decline in their standard of living; for men, it's 21%, according to 2020 research from the Journals of Gerontology.

Women are making advancements in bolstering their total wealth, yet average wage disparity between men and women has remained stagnant for the past two decades, according to a 2023 analysis from Pew Research Center. Taking into consideration lifespan, propensity for caregiving and wage gaps during working years, women likely need to save more money than men. New York Life's Wealth Watch survey found in 2024 that women with a 401(k), IRA or other investment vehicles contributed less to them than men.  Benefit advisers must take these differences into account for clients.

For couples that divvy up financial responsibilities during their marriage, a sudden change can be especially stressful and challenging. New York Life's Wealth Watch survey found that in 2024, while women and men in cis-hetero couples may have equal responsibilities in driving income and wealth for their households, less than 40% of married women report making all or most of the financial decisions within their household. As a result, they left crucial long-term decisions like choosing and maintaining a relationship with a financial adviser, managing investments and retirement savings, and purchasing financial products up to their male partner.

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Suddenly single support
Amid growing instances of gray divorce among employees, benefit advisers should encourage clients to evaluate their employee experience and provide equitable access to solutions, focused on life events like divorce in which financial challenges, mental health and even disability may be relevant. 

Benefit advisers can help address and reduce the stigma around divorce by helping organizations highlight relevant solutions as part of the total benefits offering, verbalizing commitment to mental well-being, and creating a culture of belonging. Adjusting to single life after decades of marriage can exacerbate feelings of loneliness. Advisers should encourage their clients to provide communities and support systems, including mental health resources, manager training, employee resource groups and community events, all while respecting privacy.

Larger organizations often provide access to legal services and support, counseling and financial professionals. Legal benefits, including prenuptial or postnuptial agreements, may be worth promoting. While there's a tendency to only think about legal implications during divorce, it's important to establish independent financial strategies inclusive of protection products, regardless of marital status. This is especially true for women, who tend to experience more income loss post-divorce.

The process of divorce can deplete or significantly impact savings and retirement. Benefit advisers should strive to provide education and guidance around workplace offerings like disability insurance, long-term care planning and retirement accounts, such as 401(k) or Roth 401(k) accounts and the triple-tax savings advantages of health savings accounts, including opportunities for spouses to learn more. Access to emergency savings is rising, and it's a top priority when rebuilding savings after a divorce while preventing early retirement withdrawals. Regardless of a household's financial situation, the key to securing optimal outcomes amid unexpected events comes down to comprehensive planning. Financial professionals can help individuals understand workplace benefits while offering supplemental solutions and coverage as they navigate financial options.

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Divorce is a time of immense uncertainty, which can be intimidating, especially if one partner deferred financial decisions to the other during the marriage. Suddenly single investors may look to build a new adviser relationship after a divorce or continue an existing relationship to provide necessary guidance during negotiations and proceedings. Financial professionals should establish relationships with both individuals during joint account reviews to prevent financial surprises should a divorce occur.

Holistic guidance and support from workplace benefits and financial professionals aid individuals as they navigate the complexities of divorce, establish a foundation for a new beginning, and transition into retirement with confidence and security. When disruptive events like divorce occur, well-being resources help employees positively build a new, financially resilient life – at any and every age.