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How a gray divorce can impact you financially

On Behalf of | Mar 7, 2023 | Divorce

A gray divorce is a term used to describe a split that occurs between couples over the age of 50. Gray divorce has become more prevalent in New Jersey and throughout the United States in recent years, with studies showing that the rate of gray divorce has doubled since the 1990s. Divorce is always a challenging and emotional process, but a gray divorce can be challenging due to its financial implications.

Division of assets

One of the most significant financial implications of a gray divorce is the division of assets. After decades of marriage, couples have often accumulated significant assets, including real estate, investments, retirement accounts and personal property. Dividing these assets can be a complicated and contentious process, especially if one or both parties contest the divorce terms.

In most states, marital property is divided equitably, meaning it is divided fairly but not necessarily equally. Equitable distribution considers several factors, such as the length of the marriage, the income of each spouse and the contributions each spouse made to the marriage.

Retirement accounts

Many couples over 50 have accumulated substantial retirement savings, including 401(k) plans, IRAs and pensions. Dividing these assets can be complex, as there may be tax penalties if not handled correctly.

For example, if a spouse withdraws money from a retirement account before age 59 1/2, they may be subject to a 10% early withdrawal penalty. Additionally, if retirement assets are divided incorrectly, they may have negative tax implications for both parties.

Social Security benefits

Depending on the length of the marriage, a divorced spouse may be entitled to a portion of their ex-spouse’s Social Security benefits. If a couple was married for ten years or more, the ex-spouse might receive up to 50% of their former spouse’s benefits.

However, it’s important to note that the ex-spouse cannot receive both their own benefits and their former spouse’s benefits. Instead, they will receive the higher of the two amounts.


Health insurance is a crucial financial aspect of a gray divorce, especially for couples nearing retirement age. If one spouse is covered by the other spouse’s employer-sponsored health insurance, they may lose their coverage after the divorce. This can be a significant financial burden, as the cost of health insurance can be prohibitively expensive for those over 50.

Furthermore, life insurance policies are often part of a divorce settlement, particularly if one spouse must pay spousal or child support. A life insurance policy can provide financial security for the receiving party if the paying party passes away unexpectedly.

Navigating the financial side of a gray divorce

Gray divorce can have significant financial implications for both parties. It’s essential to try and maintain open communication to ensure that the divorce settlement is fair and equitable for both parties.