American baby boomers are currently getting divorced at higher rates than other generations, according to the Pew Research Center. Splitting up after age 50, which is often called "gray" divorce, can affect clients more financially than when they are younger and have fewer assets and longer timelines to save for retirement.
For financial professionals, divorce may mean helping clients you have known and worked with for generations through very difficult times in their lives. Divorce could not only disrupt their personal and family lives, but could also change their retirement goals. Here are a few key things you can do when helping clients navigate this challenging transition.
Divorce could significantly change your clients' financial situation, which may impact their progress on short and long-term goals. Having discussions around your clients' goals early — before alimony payments are negotiated and assets are divided — will help them establish a baseline for their future financial needs.
Retirement savings plans are often designed with specific lifestyle goals in mind, such as traveling with a spouse in retirement or downsizing and moving closer to grandchildren. The biggest goal your clients may see disrupted is their timeline for retirement, especially when it's based on specific savings milestones. Clients divorcing after age 50 will need to rethink these preset goals, so discussing them will help set a clear path for their financial future.
Explaining the disruption of retirement strategies
Talk honestly with clients about how dividing their assets and savings will change their current plan. But also have solutions ready to help clients stay on track with their most pressing retirement goals. After they sign the divorce paperwork, start over and help each of them build a new retirement strategy from the ground up.
Help clients create a financial "to-do" list
Financial professionals can help divorcing couples by providing a list of suggested tasks they may want to tackle to get their financial house in order. You should construct your own list based on the individual relationship you have with the client who is facing divorce.
Tasks may include simple things like closing all joint bank accounts and reopening individual ones. But other tasks may be more complicated and require discussion, including reviewing and updating all information and documentation about beneficiaries and of estates, rewriting medical directives and revising wills. Social Security, IRAs, 401(k)s and annuities will all need to be reviewed and revised. They should consult with their legal counsel and tax advisor for guidance on these issues.
Keep their business
Your job as a financial professional to a couple has likely involved both spouses, but that may change once divorce proceedings begin. While you likely have had more contact with one of the spouses throughout your relationship, you are also in a unique position to help the spouse whom you haven't dealt with before. Every couple and every divorce will be different, but it is worth considering upfront what your relationship with each spouse is going to look like post-divorce.
Two things you can do today
Immediately set up an in-person meetings with clients who are starting the divorce process to start working on a plan to help them through their retirement needs.