Divorce Rich with Jacki Roessler, CDFA

Grey Divorce after 50 Revisited: Why the Rules Completely Change with Financial Advisor, Sandy Adams, CFP

• Season 2 • Episode 11

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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.

The Divorce Rich podcast is proudly sponsored by Center for Financial Planning: Striving to Improve Lives through Financial Planning Done Right! https://www.centerfinplan.com/

SPEAKER_02:

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. Hey, if you're recently divorced or still in the middle of it, you already know that life can feel like it's been turned upside down. And let's be honest, the financial part, it's overwhelming, confusing, and often the last thing you want to deal with. That's why I want to tell you about the independent wealth management team at Center for Financial Planning. Their team of certified financial planners specializes in helping people just like you navigate life changes with confidence. Whether it's assessing your new financial circumstances, creating or updating your retirement plan, or helping you adjust to the new normal. They'll work with you to get a clear, customized plan to feel in control and move forward with confidence. So if you're interested in working with a financial planner who you can trust to have your best interest in mind and you're ready to take the next step, visit centerfinplan.com. That's centerfinplan.com and schedule a conversation. Center for Financial Planning, live your plan.

SPEAKER_01:

Disclosure. Securities offered through Raymond James Financial Services Inc., member FEMBRA SIPC. Investment advisory services offered through Center for Financial Planning 8. Center for Financial Planning Inc. is not a registered broker dealer and is independent of Raymond James Financial Services.

SPEAKER_02:

Hi, and welcome back to the Divorce Rich Podcast. Today we are going to be replaying one of the most downloaded and shared episodes of the Divorce Rich Podcast, Gray Divorce, featuring financial advisor Sandy Adams. Great Divorce or Divorce Later in Life comes with a very different set of financial, emotional, and practical considerations than divorce at earlier stages. And where people most often get caught off guard. So let's get into it. 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 um but those percentages are going up. And um again, I'm I'm really happy to have you here today to talk about it. Well, thanks so much for having me. So let's start and let's jump in and talk about it in general. Um, what are you seeing as far as trends with gray divorce?

SPEAKER_03:

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

SPEAKER_02:

Right. I I have so many clients right now, actually, that are in their 70s and several cases. Um 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're let's let 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?

SPEAKER_03:

Um, well, you know, you you're thinking um a lot of those folks are either retired or they're approaching retirement. Um that that's probably right in that range. And the first thing that you think about with a 64-year-old or 60 almost 65-year-old is um 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, um, whether or not they are going to have um eligibility for retirement health care is a question that will come up. Um, because for a spouse or um or you know, this 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 you've made it made it this long. 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? Um, because otherwise, if you're already retired, um 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 on not a Medicare eligibility yet, then um that's but that you know, then ex-spouse would have to go out into the marketplace and find health care um on the marketplace, which can be very expensive and which can be yeah. 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 healthcare benefits and other benefits.

SPEAKER_00:

Right.

SPEAKER_03:

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 going that's gonna be uh something we talk about. Social security, when do you draw Social Security? Um, but as far as the healthcare Medicare question, um, 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 you know Part B premiums or you know, the Medicare um supplemental programs premiums out of pocket until you start drawing your um social security benefit.

SPEAKER_02:

Okay. So they just send you a bill and you send them, we pay a check instead of deducting. So that's interesting. So does um as far as someone who once you make an election for social security to begin benefits, you can't change that, right? Yes and no.

SPEAKER_03:

Oh, okay. So there it there are some provisions, and I'm absolutely not a social security expert, but there are ways um to do over social security. Um, I'd say in general, yes, you want to be pretty certain once you start Social Security that you that's when you want to draw. Um, but there um are ways to say, I can I can I do it over, and you have to and you pay back what you've drawn. And you have to, there are certain time frames you have to, it's usually within a year of drawing, um uh electing the benefit, you can change your mind and say, I I'd like to stop and go back um and and restart at a later date. But you'd have to, of course, be able to um repay the benefits that you've received. So I've I don't know the numbers, I don't know the numbers. I I'm guessing it's a very small number of people that have ever done it because most most most people cannot repay the benefits they've received in order to re-elect.

SPEAKER_02:

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

SPEAKER_03:

Right, yes, yeah. And so for most most clients, we um 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.

SPEAKER_02:

Um that's a big difference, yeah.

SPEAKER_03:

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.

SPEAKER_02:

When you're working with someone, Sandy, and I know that you have you have a large percentage of older clients that you work with. Um, 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 is it's generally almost 100% of what the what the person was collecting, 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 I'm assuming that that is on your radar when you're working with clients, you know, to get that information from them.

SPEAKER_03:

Um and and as well, um there are ways also to collect on a uh former spouse's benefit if you divorce as long as you don't remarry. Um so but you have to follow the very complicated social security rules around that. So keeping keeping track of um all of those right.

SPEAKER_02:

That's one of the clients need, I think. I 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. Um, 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. Um Sandy, let's talk a little bit about grade divorce couples in the house and what their options are.

SPEAKER_03:

Um well, stepping back, um always planning, looking at the assets that you have in the income you 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. Um, because whether or not you can afford within the division of assets is one thing, but you have to remember that you know the cash flow needed long term to afford to um you know hold the property, taxes, insurance, utilities, upkeep of a home is is a whole nother ball game on your own with only one income versus two, potentially. Um, but if you've determined that you will be able to support the home um after the divorce, then finding the liquidity to to potentially buy out a spouse, um looking at the assets that you're dividing, if there's liquidity that you can afford to earmark towards the purchase of the home. Um 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 um with these tools as a tool just because um back you know in 2008-2009 um they were not as regulated and um people got burnt um using them a little bit. Um they don't have the greatest interest rates at the current moment, um, but they are a lot more flexible as a tool um these days and they are much more regulated. Um, and they can be very useful as a tool, especially in a in a gray divorce situation.

SPEAKER_02:

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

SPEAKER_03:

Uh um so generally you would you can get a loan um for um any a percentage of the existing equity in your home less any less any existing loan. So so say your houses were$200,000. Um you maybe you have an existing loan of um$50,000, they won't give you 100% of the existing equity, but we'll say you can't. Okay. So you can get so you can get um, so say you can get$150,000 of um uh home equity conversion loan. Um and then you would need to perhaps buy your um spouse out of half of the home. So you can use um, you know,$75,000.$75,000 of that$150,000 towards buying your sex spouse out of the home. And then you'd have$75,000 in a you know pot of money to use now towards um 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 uh 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.

SPEAKER_02:

Okay. And do you have to make payments? Um, so if you let's say that in that case, you needed to pay yourself$75,000 in cash. The benefit of this is that you don't have a mortgage payment on it, right? So Right.

SPEAKER_03:

Yep. Yeah, you can if you want to, so that going forward you um have more equity in the home, or but they're not required. Payments are not required. So that kind of frees you up from that burden of uh ongoing mortgage payments.

SPEAKER_02:

Okay, and I think that the biggest fear that I hear, oh, 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 they they die and that their their um their heirs won't have any of the equity in it. That it it just all goes to the mortgage company.

SPEAKER_03:

Yeah. Um, now these days they're a little bit more flexible. Um, you can do anything you want with the home. Um 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 um 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. Okay, or leave more money to their heirs. Okay. Or leave more money to their heirs later on.

SPEAKER_02:

Um so let's pivot a bit and talk about another topic related to gray divorce. Before we start a 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?

SPEAKER_03:

Yeah. So there's been some kind of recent research done on just the impact of gray divorce, particularly on women. And it as it the research has shown about 27% of women long term after gray divorce end up in poverty. And you'd think, wow, that's pretty staggering. Why would this be m women more than one 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, you know, like as we were talking, you know, women in their, you're seeing people in their 70s or their 80s. A lot of those women didn't have their own careers, you know, when they were younger. Or if they did, there was a limited time that they were in the in the career pool, right? So they didn't build up a whole lot of money on their own. Right. They didn't have a career. So they also weren't necessarily in charge of the finances long-term, not financially fabby. In general, they also live longer. Women live tend to live several years longer than men. Right. Um, so when it comes to need for long-term care, more women than men will need long-term care. And when couples are married, there's a 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.

SPEAKER_02:

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

SPEAKER_03:

If 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 um living arrangement, the golden girls living arrangements, things like that, where you 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 idea.

SPEAKER_02:

That's an amazing idea. And I love, 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 a mental health professional. And, you know, we have conversations as a full team. And I, you know, I I I always ask people, do you have long-term care insurance? We 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?

SPEAKER_03:

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

SPEAKER_02:

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 what they can qualify for. I think all of all of these things that you and I have talked about, and there are so many others that relate to this. Comes it 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. I have clients that are insistent that they don't want to take social security, even though from a capitalist 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 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. Is there anything that we haven't covered? Is there anything you have a burning desire for our listeners to hear?

SPEAKER_03:

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. Um through that process, it's very traumatic for most people.

SPEAKER_02:

So 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 and 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 gonna give your contact information in the show notes. How do you prefer people to get in in touch with you if they wanted to sit down and talk with you?

SPEAKER_03:

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're gonna do something.

SPEAKER_02:

Yeah. 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 so welcome. 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, podcast, and share this link with any friends or family that you think might benefit from this.

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Jacki Roessler, CDFA

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