Caught up in the Baby Boomer Divorce Boom? Be Prepared for the Financial Challenges
As divorce becomes less common for younger adults, Americans over 50 are getting divorced at a much higher rate than they used to, according to a 2017 report from Pew Research. Based on data from the National Center for Health Statistics and U.S. Census Bureau, the study found that among U.S. adults ages 50 and older, the divorce rate has roughly doubled since the 1990s. This phenomenon has been coined “gray divorce.”
The rising popularity of gray divorce
So why the spike in divorces among baby boomers? Several factors can play into this decision. For some, it’s empty nest syndrome. The kids are grown or off at college, and now that mom and dad have become husband and wife again, they find that their interests outside their family have taken different directions. Other factors:
- Longer life expectancy increases the chance that marriage will end in divorce rather than widowhood.
- Baby Boomers were the first group to divorce and remarry in young adulthood; typically, the rate of divorce is 2.5 times higher in a remarriage compared to a first marriage.
- The rise of social media, as one in three divorce filings mention online affairs.
Unique financial considerations for older partners
Financially speaking, gray divorcees often face more complex issues than their younger counterparts:
- Equitable division of pension plans or retirement savings
- Caregiver responsibilities for aging parents or dependent children/grandchildren
- College funding, including ownership of 529 college savings plans
- Expectations of heirs
- Collection of Social Security
- Life insurance to cover alimony obligations
Clearly, informed financial decision-making is critical when faced with the possibility of a gray divorce.
Consider all the financial possibilities and ramifications
Most divorces end with mutual assets such as a home being sold and profits split as a couple goes their separate ways. For older homeowners, this may prove more difficult — especially if much of their equity is tied up in their home. What if it’s not the best time to sell, and both owners are counting on maximizing their real estate investment to fund their retirement? Or one spouse wants to remain in the home, but can’t afford to buy out the other’s share?
In situations like these, a reverse mortgage could be the answer. As more older couples divorce, this type of loan is becoming an increasingly popular financial planning tool. Instead of making payments to a lender, the homeowner can choose to receive monthly advances. They might also opt to receive a lump sum, maintain a ready line of credit, or a combination of these to suit their individual situation.1 This can be a godsend to couples who are ready to part with each other, but aren’t quite ready to part with their investment.
Used correctly, a reverse mortgage can help couples who are divorcing reach their financial goals and help them leverage the equity in their home into a more comfortable retirement.
For homeowners and homebuyers age 62 and older, a reverse mortgage loan can help eliminate the burden of monthly mortgage payments and free up cash for unexpected expenses, healthcare costs or home improvements. As part of their loan obligations, borrowers remain responsible for keeping current with property taxes, insurance, maintenance and any homeowner’s association fees.
If you’re 62 or older and considering a divorce but have held off for financial reasons, you may want to consider the benefits of a reverse mortgage to leverage the equity in your home. Reach out to a knowledgeable reverse mortgage specialist from Reverse Mortgage Funding LLC by calling 877-485-1359, so you’re up to speed on the options available to you.
SEE WHAT FUNDS YOU MAY HAVE AVAILABLE
If you have equity in your home and believe you meet the eligibility requirements, a HECM may be the option that could help you retire smart.
1 Borrowers who elect a fixed rate loan will receive a single disbursement lump sum payment. Other payment options are available only for adjustable rate mortgages.
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