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Helping Clients Navigate "Gray Divorce"

Commentary April 02, 2021 at 09:23 AM
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With spring weather and widespread COVID-19-19 vaccine availability on the horizon, many couples are emerging from pandemic lockdowns stronger. Others will be making the decision to go their separate ways.

Baby boomers are currently getting divorced at higher rates than any other generation, according to the Pew Research Center. Trends suggest people decide their differences are irreconcilable right after big family holidays, after kids go off to college or another triggering event. Splitting up after age 50, which is often called "gray" divorce, can affect clients more financially than when they are younger with 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 and the steps needed to reach them. Here are a few key considerations to keep in mind when helping clients navigate this challenging transition.

1. Redefine goals

Divorce could significantly alter your clients' financial situation, which may impact their progress on short and long-term goals. It's important to have discussions around your clients' goals early on. This will help them establish a baseline for their future financial needs.

The biggest goal your clients may see disrupted is their timeline for retirement, especially when it's based on specific savings milestones. 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. 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.

2. Outline the disruption of retirement strategies

Have a transparent conversation with clients about how dividing their assets and savings will change their current plan. However, be prepared to have solutions ready to help clients stay on track with their most pressing retirement goals. After the divorce is finalized, start over and help each of them build a new retirement strategy from the ground up.

As divorce proceedings may also be new to some, taxes are understandably low on the list of things they may worry about when getting divorced. But ignoring Uncle Sam can be an expensive mistake. You will play a critical role to make sure you're supporting your clients by ensuring their new retirement strategy accounts for new filings, assets and liabilities, consulting with their legal counsel and tax advisor as appropriate.

3. Help clients create a financial checklist

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.

4. Re-establish relationships

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. As your job as a financial professional to a couple has likely involved both spouses, this may change once divorce proceedings begin. While you likely have had more contact with one of the spouses throughout your relationship, you are in a unique position to help the spouse whom you haven't dealt with before.

5. Get started today

Overall, your clients will lean on you for guidance and support during this tumultuous time. What can you do today to help? Immediately set up a meeting with clients who are starting the divorce process and start working on a plan to help them through their retirement needs. Having someone commence the process as soon as possible will make the transition easier down the road.

Rod Mims (Photo Athene) Rod Mims is senior vice president, distribution, at Athene USA.

(Image: Adobe)

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