Divorce Rich with Jacki Roessler, CDFA

Divorce after 50; The Finances of "Gray Divorce" with Sandy Adams

• Jacki Roessler, CDFA • Season 1 • Episode 17

Share episode

Send us a text

Unlock crucial insights into the growing phenomenon of gray divorce with our latest episode featuring Sandy Adams from the Center for Financial Planning. We'll unravel the complexities older adults face when contemplating a late-in-life divorce. From understanding the significance of healthcare insurance and Medicare eligibility to the intricacies of timing retirement benefits, Sandy shares indispensable advice that can shape a financially secure future. We dive into the nuances of Social Security, clarifying the difference between Medicare and Social Security benefits, and discussing options for reconsidering Social Security elections under specific conditions.

In another enlightening segment, we take a closer look at equity conversion mortgages, offering a clear explanation of how loans against home equity operate. Addressing common concerns surrounding interest rates, home sales, and impacts on heirs, we aim to demystify this financial tool. We also spotlight the unique financial challenges women often encounter during gray divorce, such as higher poverty rates and the demand for long-term care. Sandy provides practical strategies to mitigate these risks, including long-term care insurance, asset leverage, and co-op living arrangements for mutual support. Tune in to discover how you can navigate the financial intricacies of gray divorce with confidence and knowledge.

RESOURCES

Visit us at https://www.roesslerdivorce.com/ to learn more about Jacki's practice and to find valuable resources for your case.

Jacki Roessler:

Welcome to the Divorce Rich Podcast. I'm your host, jackie Ressler. I've been a certified divorce financial analyst for 28 years, helping clients and their attorneys navigate the often complex and confusing financial issues in divorce. If you're in the process of, or considering, divorce, now is the time for you to take a deep breath and give yourself permission to find clarity on the financial issues you're facing. Rich means many things. To many people. I believe the best definition of being rich is someone who has access to many resources. Along with my guests on this podcast, I will be bringing you a wide variety of information so that you can make sound and informed financial decisions for your financial future.

Jacki Roessler:

Hi everyone and welcome back to the Divorce Rich Podcast. This is Jackie Ressler, and I am very excited today to be interviewing Sandy Adams from the Center for Financial Planning. I've known Sandy for a very long time. She's a fantastic advisor. She is a lead planner and a partner at the Center for Financial Planning and she has a specialty in working with older couples, which is applicable for our topic today. She has a master's degree in gerontology, and our topic today is gray divorce, which is coming up more and more often in my practice. Gray divorce actually is technically anyone getting divorced over the age of 50. Now, sandy, since I am well within that range, I like to think of it more like 60 is enough, but those percentages are going up and again, I'm really happy to have you here today to talk about it.

Sandy Adams:

Well, thanks so much for having me.

Jacki Roessler:

So let's start and let's jump in and talk about it in general. What are you seeing as far as trends with gray divorce?

Sandy Adams:

We are definitely seeing more and more older couples getting divorced, and you know, who knows what the reasons are, whether it's just because it's more socially acceptable now than it used to be, or what the reasons are but it definitely is happening, and I am also within the range, so I also like to think of it as being someone older than me, but the statistics are pretty overwhelming. Now, younger people are waiting to get married longer, so that probably impacts the statistics, but since 2017, the numbers of people over age 50 getting divorced is increased double, and then those over 65, it's tripled, so it really is those over the 65 mark that are divorcing at higher rate. It's really shocking. Which is really shocking. Now, that doesn't mean they always stay divorced. They're marrying other people, but they're splitting from their original partners other people, but they're splitting from their original partners.

Jacki Roessler:

Right, I have so many clients right now, actually, that are in their seventies. I have several cases and yeah, they have, but they have all different kinds of financial issues that a younger couple has and it's so critical that they get the right advice before they start thinking about divorce. What are some of the um? What are some of the the main topics that you would cover with someone coming to you, let's say that they're they're 65. They let's say that they're 64. We'll make it that number, so they're 64 ish, and they come to you and they're thinking about divorce. What are some of the topics that you would bring up with them?

Sandy Adams:

Um, you know you're thinking, you know a lot of those folks are either retired or they're approaching retirement. That's probably right in that range. And the first thing that you think about with a 64-year-old, almost 65 year old, is healthcare, or, you know, healthcare insurance, right? So the 65 age is the age at which you are eligible for Medicare. So if we're talking to a couple about that, whether or not they are going to have eligibility for retirement health care, the question that will come up Because for a spouse, or you know the spouse, that may not be covered by the retirement health care, or if neither of them are, the question about can you hold on until you're eligible for Medicare might be a question Um, so you've made it right, you've made it this long.

Sandy Adams:

Does it make sense to? Um, you know, especially if you're already retired, does it make sense to hold on until you're eligible for Medicare? Because otherwise, if you're already retired, there may be a spouse that's not going to be eligible for the employer health care any longer. If there's a divorce and if there's not a Medicare eligibility yet, then that's that, you know. Then ex-spouse would have to go out into the marketplace and find health care on the marketplace.

Jacki Roessler:

Which can be very expensive, which can be yeah.

Sandy Adams:

So with a lot of these things, timing can be crucial and it's a lot more complicated with older adults than than for younger people who are working and have health care benefits and other benefits um. So, um, and just as an aside, you know you don't have to be drawing social security um to be eligible for medicare, so that's a totally separate issue. That is also one that's one that's going to be something. We talk about Social Security, when do you draw Social Security? But as far as the healthcare Medicare question, you don't have to be drawing Social Security to be eligible for Medicare. You could get Medicare. You just will pay any of the Part B premiums or the Medicare supplemental programs premiums out of pocket until you start drawing your Social Security benefit.

Jacki Roessler:

So they just send you a bill, and you send them, you pay a check instead of deducting. So that's interesting. So as far as someone who, once you make an election for social security to begin benefits, you can't change that right.

Sandy Adams:

Yes and no, oh, okay. So there there are some provisions, and I'm absolutely not a social security expert, security expert, but there are ways to do. Over social security. I'd say in general yes, you want to be pretty certain once you start social security, that that's when you want to draw. But there are ways to say can I do it over and you pay back what you've drawn? And there are certain timeframes you have to. It's usually within a year date, but you'd have to, of course, be able to repay the benefits that you've received. So I don't know the numbers, I don't know the numbers. I'm guessing it's a very small number of people that have ever done it, because most people cannot repay the benefits they've received in order to reelect.

Jacki Roessler:

And the reason to put it off as long as you can is that the monthly payment goes up, right, right.

Sandy Adams:

Yeah, and so for most clients we suggest that you at least wait until your full retirement age benefit to draw, if you can, and then, if you wait longer, there's a pretty nice like 8% bump up between full retirement age and age 70. That's a big difference, yeah, which is a big difference. Yeah, which is a big difference. And then certainly there's no reason to wait until after age 70, because there's no increase in benefit after age 70.

Jacki Roessler:

When you're working with someone, sandy and I know that you have a large percentage of older clients that you work with One of the things that I find that my clients might miss is that when they as long as they were married to someone for at least 10 years when they that spouse dies, they're eligible for the full the survivor benefit, which it's generally almost 100% of what the what the person was collecting their former spouse, their former spouse. But Social Security isn't going to come knocking on their door and letting them know that now is a good time for them too. So I'm assuming that that is on your radar. When you're working with clients, you know to get that information from them and as well.

Sandy Adams:

There are ways also to collect on a former spouse's benefit if you divorce, as long as you don't remarry, but you have to follow the very complicated Social Security rules around that. So keeping track of all of those.

Jacki Roessler:

Right, and that's what clients need. I think I strongly believe that clients should work with the financial advisor before and after the divorce. Another big issue that comes up for a lot of clients that I work with that are getting divorced is what to do with the house. They might have a lot of equity in the house for a lot of people it's paid off, that's a goal during their working years but if they're getting divorced now, they have to split up that asset, even though one person might want to keep it, but they don't have enough cash to buy out the other person. Sandy, let's talk a little bit about great divorced couples in the house and what their options are.

Sandy Adams:

Well, stepping back, always planning, looking at the assets that you have in the income that you will have and making sure that you are going to be able to afford long-term the property. And, as you know, when you're going through that process with clients, that's always a topic of conversation, because whether or not you can afford within the division of assets is one thing, but you have to remember that the cash flow needed long-term to afford to hold the property taxes, insurance utilities you know, hold the property taxes, insurance, utilities a heap of a home is a whole nother ballgame on your own, with only one income versus two potentially.

Sandy Adams:

But if you've determined that you will be able to support the home after the divorce, then finding the liquidity to after the divorce. Then finding the liquidity to potentially buy out a spouse. Looking at the assets that you're dividing if there's liquidity that you can afford to earmark towards the purchase of the home. If you don't have that, looking at utilizing something. If, if you are over age 62, the possibility of use utilizing the tool of the reverse mortgage, or what they now call the home equity conversion mortgage, is something that can be considered. Um, a lot of people have a bad taste in their mouth with these tools as a tool just because back in 2008, 2009, they were not as regulated and people got burnt using them a little bit. They don't have the greatest interest rates at the current moment, but they are a lot more flexible as a tool these days and they are much more regulated and they can be very useful as a tool, especially in a gray divorce situation.

Jacki Roessler:

Can you explain to our listeners? How does that work? So what is just the general way that equity conversion mortgage would work?

Sandy Adams:

So generally you can get a loan for a percentage of the existing equity in your home, less any less any existing loan. So your house is for two hundred thousand dollars. Um you, maybe you have an existing loan of um fifty thousand dollars. They won't give you a% of the existing equity, but we'll say you can.

Sandy Adams:

So say, you can get $150,000 of a home equity, so you can use you know $75,000 of that $150,000 towards buying your spouse out of the home and then you'd have $75,000 in a you know pot of money to use now towards either paying off the existing loan, if you wanted to, to ease up your cash flow going forward, or you could set it in a you know emergency fund or some kind of something with a fixed rate of interest to use as going forward for you know upkeep on the home, or however you wanted to use it.

Jacki Roessler:

Okay, and do you have to make payments? So if you, let's say that in that case, you needed to pay your spouse $75,000 in cash, the benefit of this is that you don't have a mortgage payment on it, right, right?

Sandy Adams:

Yep, yep, you can if you want to, so that going forward you have more equity in the home. But they're not required, payments are not required. So that kind of frees you up from that burden of ongoing mortgage payment.

Jacki Roessler:

Okay, and I think that the biggest fear that I hear obviously is the interest rate and the cost of the loan. But also people are worried that if they get a reverse mortgage, that they can't sell the house, or if they die and that their heirs won't have any of the equity in it, that it just all goes to the mortgage company.

Sandy Adams:

Yeah, Now, these days they're a little bit more flexible. You can do anything you want with the home. You would need to kind of always the loan. Any existing balance on the loan gets paid back to the mortgage company. So again, that's a reason some people continue to pay a balance back on the loan because they want to build back the equity in the home if they in the future want to sell.

Jacki Roessler:

Okay, or leave more money to their heirs.

Sandy Adams:

Okay, or leave more money to their heirs later on.

Jacki Roessler:

So let's pivot a bit and talk about another topic related to gray divorce. Before we started recording, you and I were talking a little bit about how women are more negatively impacted by gray divorce. Can you talk a little bit about that and tell us some scary information?

Sandy Adams:

Yeah, so there's been some kind of recent research done on just the impact of grade of worse, particularly on women, and, as it the research has shown, about 27% of women, long term after grade of worse, end up in poverty. And you'd think, wow, that's pretty staggering. Why would this be? Women, more than men, tend to stay single. We call these people solo agers. And because women have not built up their own investment accounts on their own during their lifetime, especially women in the older age group, as we were talking, you're seeing people in their 70s or their 80s.

Sandy Adams:

A lot of those women didn't have their own careers when they were younger or, if they did, didn't have their own careers.

Sandy Adams:

You know, when they were younger or if they did, there was a limited time that they were in the career pool, right, so they didn't build up a whole lot of money on their own Right.

Sandy Adams:

They didn't have a career, so they also weren't necessarily in charge of the finances long-term not financially savvy. In general, they also live longer. Women tend to live several years longer than men. So when it comes to need for long-term care, more women than men will need long-term care. Need for long-term care, more women than men will need long-term care and when couples are married, there's quite a period of time where men and women will support each other from a long-term care perspective and that will allow them to stay in their own home without the need for either care coming into their own home or that need for them to go to an assisted living or nursing home, and that saves a ton of money on long-term care needs. But when we have women out there living solo without a care partner, they'll need to enter that assisted living, nursing home world much sooner and the costs of that are staggering and that puts many of them into poverty.

Jacki Roessler:

What would you recommend women that are older, that are getting divorced, what should they prioritize and what do you recommend that they do to protect themselves so that they don't end up in that situation?

Sandy Adams:

Well, if they are divorced young enough and they're, they have the ability to get long-term care insurance. From a financial and health perspective, certainly that's a priority. Okay, leverage, leverage assets to you know. If there are assets that they can leverage to get you know any kind of long-term care insurance, that that definitely is a priority. There are also things that they can do to leverage their finances. All the time we're hearing about these women supporting women, things like it's almost like the living arrange, the golden girls, living arrangements, things like that, where you know, there know there's no, you know not a need to remarry, but they're pooling assets and pooling income and sharing expenses and things like that, and that helps with financial support and long-term care support as well. They're taking care of each other. So that's an amazing you know those kind of co-op living arrangements and things like that, that they're helping each other.

Jacki Roessler:

That's an amazing idea and I love.

Jacki Roessler:

I mean I never really think about it, but leveraging their assets to buy a long-term care policy might be really important. I know that I try to bring that up in my most of my divorcing clients that are over 70 are in the middle of a collaborative divorce. So where they, you know they want things to be amicable. Each has their own attorney. There's a financial neutral and sometimes a mental health professional, and you know we have conversations as a full team and you know I always ask people do you have long-term care insurance? You want to make sure you keep that in place. Most don't. So the idea of I mean, is it possible? How old do you, how young do you need to be to be able to purchase a long-term care policy?

Sandy Adams:

I've already purchased. I have alzheimer's in my family so I did mine already. But I've had people in their 70s buy the hybrid type because the underwriting for hybrid is less intensive, so you can get that at a later age than traditional. Okay, it's easier to get.

Jacki Roessler:

So that might be an important thing for someone who is considering divorce to just explore options before they even file on what they can qualify for. I think all of these things that you and I have talked about, and there are so many others that relate to this. To me, it all goes back to. Every situation is different and every person needs to sit down with a financial advisor to get all the information that they need. Again, I don't think that very many people are thinking about, you know, in terms of Medicare, when are they eligible for Social Security? They're trying to maximize it.

Jacki Roessler:

I have clients that are insistent that they don't want to take social security, even though, from a cash flow standpoint, they really need to, but because they've heard in the media so much about holding off that it puts them in a position of drawing down assets before they need to. So, again, I think that for most people, it would be beneficial to sit down with someone and have an important meeting. Yeah, is there anything that we haven't covered? Is there anything that you have a burning desire for our listeners to hear?

Sandy Adams:

other than to say that divorce, whenever it happens, is a major life transition and people tend everyone handles those major life transitions very differently and for a lot of people that will tend to overwhelm them and it's very hard to think clearly during those times. So having someone to help them through that is crucial. If you can find someone that can get to know you before the divorce and then have them help you through that process and it can take I mean, those kinds of transitions for some people can take months to years for you to get through. But if you can find someone that can get to know you well before the process starts, then you have a trusted partner that can hold your hand through it, right Through that process. That's very traumatic for most people.

Jacki Roessler:

It is. I mean, it is probably the single largest financial transaction of anyone's life, because during their lifetime, once they're when they pass away, then there's a financial transaction but they're not actually involved in it, Whereas this is a major to go through that at a time that's so traumatic. You're right, Having a thinking partner that can be objective and that you trust is really important. So thank you so much, Sandy. I'm going to give you your contact information in the show notes. How do you prefer people to get in touch with you if they wanted to sit down and talk with you?

Sandy Adams:

Just giving us a call giving me a call or shooting me an email either way, whichever is most comfortable for people and then we schedule just an initial consultation just to make sure that people are comfortable before we Right that's a good fit, yeah.

Jacki Roessler:

Okay, well, I will make sure that your contact information is in the show notes, and I thank you so much for sharing all of your knowledge with us. You are?

Sandy Adams:

so welcome.

Jacki Roessler:

Thank you so much for taking time out of your day to listen to Divorce Rich Podcast. If you like this podcast, please follow us on Apple or anywhere that you download podcasts and share this link with any friends or family that you think might benefit from this information.

People on this episode

Head Shot

Jacki Roessler, CDFA

Host

Podcasts we love

Check out these other fine podcasts recommended by us, not an algorithm.

HerMoney with Jean Chatzky Artwork

HerMoney with Jean Chatzky

Jean Chatzky Her Money
Motley Fool Money Artwork

Motley Fool Money

The Motley Fool