For the new generation of empty nesters, marriage breakups are increasingly common and with "grey divorces" come a unique set of financial challenges.
A whopping 80% of people who divorced at the age of 50 or older will delay their retirement because they need to work longer than planned, and 62% say their post-divorce savings and investments will no longer be adequate to fund their retirement, according to recent research from Investors Group.
Working with a financial adviser before, during and after divorce can help you reach an amicable settlement and ease the task of reorganizing your finances, the poll found.
An adviser removes some of the emotion associated with divorce, says Christine Van Cauwenberghe, assistant vice-president of tax and estate planning at Investors Group.
An adviser can help negotiate the division of such assets as the family home, RRSPs and CPP credits so there's a "win-win" for both sides, she says.
Rolling over RRSPs to the lower-income spouse, for example, might make sense because he/she will pay less tax than the higher-income earner when funds are withdrawn.
According to the poll, those who sought financial advice before divorcing were more confident about their retirement: 39% expected to still have enough savings and investments to fund the retirement lifestyle they had planned. Just 28% of those who didn't work with an adviser felt the same confidence.
Certified divorce financial analyst Eva Sachs of Toronto advocates an approach that brings both partners to the settlement table. "I take their income, expenses, support, remaining assets and remaining debts to paint a picture of what their financial future will look like," she says.
Doing so helps each party, their lawyers and any mediators see the long-term implications of various settlement options. A 'lifestyle analysis,' meanwhile, predicts what each will need in their newly single lifestyle and in retirement.
"It's a double whammy on a financial plan," says Sachs, co-author of When Harry Left Sally: Finding Your Way Through Grey Divorce.
New financial realities mean it's more important than ever to manage budgets and expenses thoroughly. One partner may realize the family home is no longer affordable. Some might need to re-enter the workplace or go from part-time to full-time work; others will need to delay retirement.
If you were involved in a divorce and division of assets in your 30s or 40s, you'd still have time to rebuild your assets. "The older you get, arguably the less risk you should be taking with your investments because if the risk doesn't work out you have less time to make up the difference," Van Cauwenberghe says.
Many older women need to now take a more active role in their investments, beginning with using a financial adviser they're comfortable with and understanding their portfolio. "When you're 60 and on your own, you may need to be marginally more aggressive in your portfolio than you were in the past," Sachs says.
Finally, renewing your will and beneficiary designations is critical when divorcing.