Grey divorce? What it means for your finances

After about five years of thinking about it, Paul and his wife separated when he was 53. They divorced two years later, ending a marriage of 17 years. “We stayed together for several years longer than we probably should have, for the sake of our daughter,” he recalls.

What’s grey divorce?

Paul is among the significant number of Canadians who decide to end their marriages later in life. It’s a phenomenon called “grey divorce". According to Statistics Canada, the average age at divorce has been rising steadily for decades. In 1970, it was 38.8 years; in 2020, it was 46. On average, Canadians are marrying later, and their marriages are lasting longer. That makes them older if and when they divorce.

Statistics Canada also says the divorce rate among people age 50 and older rose by 26% between 1991 and 2006, but has remained fairly stable since. That’s despite a sharp drop in divorces overall in 2020. (The drop was probably due to the lack of access to courts during the pandemic lockdowns.)

Why are more people divorcing later in life?

What prompts someone to walk away from a longstanding marriage that’s become more habit than honeymoon? Everyone has a different story to tell:

• Their children are grown and gone, and they feel more able to put their own happiness first.
• Their relationship has been deteriorating for many years, but has finally reached a tipping point.
• More women today have careers, and have the independence of money saved in their own names.
• Divorce no longer carries the stigma it once did.
• While in the working world, women may have developed a greater sense of individual worth and identity. Divorce may no longer seem inconceivable.

Can I afford a divorce at my age?

Whatever your reasons for thinking about divorce, money will be a factor in your decision. Lawyers’ fees are one important consideration. If you take the adversarial route, your legal bills could be hefty. But if you’re able to manage your split amicably, you can spend less. “My ex-wife and I could have battled using separate lawyers,” notes Paul. “But we were able to sit at the same table and work things through reasonably with one lawyer. Doing that saved an enormous amount of money.”

You may also be concerned about living costs, going forward. Worry over losing their homes or drastically downgrading their lifestyles can be enough to keep some people in unhappy marriages. The solution to worry, however, is information. That said, unique challenges face those divorcing later in life. Understanding and taking ownership of your money can be intimidating. That’s especially true if your partner has always managed your family’s finances. Reviewing what you own and what you owe can help you make informed decisions about the future. Here’s how:

• Inventory your assets. Collect details about your personal financial situation. That includes tax returns, year-to-date pay stubs, employee benefits statements, insurance policies and pension statements. It also includes information on all registered accounts (RRSPs, RRIFs, TFSAs and RESPs) and non-registered investments. As well, look at family real estate: the family home, cottage, rental properties. Pull together current property assessments, property tax statements, utility bills and receipts for maintenance or repairs. If you own rental properties, gather statements of rental income and expenses for them, too.
• List your liabilities. Compile information for all outstanding loans, debts and obligations other than a mortgage. That includes lease payments, lines of credit, credit cards, and student, business and car loans.

It’s also very helpful to get a full picture of your ex’s worth, too. That way, you can count assets such as RRSPs and pensions, which your ex may have to share with you. Typically, your lawyer will ask your ex’s lawyer for this information.

I’m getting a divorce; what do I do next?

If your review has helped you decide to divorce, there are further financial steps to take:

• Update your will. Revisiting your estate plan is a good idea to ensure your will falls in line with your new circumstances. Paul stresses the importance of this step. “It’s vital that your will reflects all the arrangements you’ve made for your money,” he says. Note that your lawyer may not be able to represent both you and your ex. One of you may have to find a new one.
• Update your beneficiaries. As with any big change, it’s important to keep beneficiaries on investment accounts and insurance policies current.
• Consider consolidating. After separation, it’s common to find assets in several different places when you take full ownership of your accounts. Consolidating your assets with one trusted advisor has many advantages. An advisor will make sure you take care of things like changing beneficiaries on insurance policies or RRSP accounts. Bringing all your investments together under one roof may also qualify you for reduced management fees. Did you and your ex share an advisor? You may want to decide whether to continue that arrangement.
• Review your retirement plans. You’ll likely need to share some of your retirement savings with your former spouse. Especially if there’s a big gap between you and your ex. (One of you may have been a stay-at-home parent, for example.) Your advisor can help you by putting a current and a future value on your assets. Depending on the results of negotiations or litigation, you may decide to delay your retirement a year or two. Whenever you do retire, your advisor can help you best access your retirement income, given your changed status.

In Paul’s case, his advisor did more than help him sort out his finances. “He helped me a great deal emotionally as well, because he’d been through a similar experience,” he says. Paul warns against listening to advice from friends whose stories may have been different from his own. “One friend said I should be very hard-nosed and take my ex-wife to court,” he says. “She’d had a bad experience with her own divorce, but I’m glad I didn’t take that route.”

When Joanna’s* 20-year marriage ended, she worked with her advisor to understand her finances and plan her new future. “My advisor helped me put together a plan. It covered what I made, what I owed, what I owned,” she said. “I needed that, to be honest. It helped me realize that I was going to be okay and that I could afford to be independent.” Fifteen years ago, I never would have thought I’d be where I am today,” she said. “Life is so much better than I could have imagined.”

* Some names have been changed to protect the privacy of the individuals interviewed.

This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.