An alarming fact has surfaced amid the media fascination with aging baby boomers, and it’s not about the number of knee replacements or sales of touring motorcycles (although both of these are up).
They’re getting divorced.
In 2009, the divorce rate for people in the 50-and-older age group was twice as high as it was in 1990 (10 divorced persons per 1,000 married versus five divorced persons per 1,000 married). By contrast, the overall U.S. divorce rate stayed essentially flat during this 20-year span.
These findings by Professor Susan Brown and Associate Professor I-Fen Lin of Bowling Green State University’s department of sociology are significant for financial advisors. The increasingly larger older segment of the population holds most of the nation’s wealth, yet divorce can leave both ex-spouses at risk of a financially pinched retirement. What’s more, Brown and Lin say, “the divorced are expected to constitute a larger share of older persons.”
Why this later-life boom in busting up? What are its implications in dealing with divorcing couples and divorced individuals? What kind of resources should you have on hand to help older clients going through this often-painful life transition?
In this article, the first in a two-part series, we’ll identify the key issues and suggest tips on how to work with divorcing boomers. Next month we’ll focus specifically on divorce and older women—a group that presents unique challenges for advisors.
WHAT’S GOING ON?
You’re probably aware that a number of your older clients are divorcing or divorced, but Brown and Lin were the first to quantify what’s been happening in this age group.
“We might imagine that older adults don’t get divorced,” Brown told me. “That might have been true in 1990 when only one in 10 divorcés were over 50; but today, we found, it’s one in four.”
Why are so many people divorcing later in life? The BGSU study suggests several reasons.
“Me” Generation expectations. Boomers were the first generation to bring expectations of self-fulfillment and personal happiness to marriage. If they’re dissatisfied with the way their marital relationship has changed over time, they feel entitled to seek greener pastures.
Greater longevity. As Marlo Van Oorschot, Esq., a family law attorney in Los Angeles and author of “How to Survive Grey Divorce,” expressed it: “People are thinking, ‘I’m 50 or 60 now; I could live till I’m 90. I don’t want to live with this person for the next 30 or 40 years of my life.’”
More women in the work force. As more wives earn paychecks and start to build their own 401(k)s, the economic ties have frayed that might have kept many of them in unhappy marriages.
Greater societal tolerance of divorce. Boomers grew up when divorce was losing the stigma it had for earlier generations. Now, instead of “until death do us part,” many consider the vow to be “until we grow apart.” Linda Leitz, a Colorado Springs, Colo., planner who specializes in helping people during and after divorce, told me, “It may be the new normal for baby boomers to have three marriages: a starter marriage, a family marriage to raise kids and a golden years marriage.”
Previous divorces. Splitting up may not seem so scary for folks who have already been through it. According to Brown and Lin, the divorce rate for remarriages is 2.5 times the rate for first marriages. When I mentioned this to Barbara Shapiro, a CFP and certified divorce financial analyst who heads HMS Financial Group in Dedham, Mass., she observed, “I think the stresses of blended families can greatly contribute to these breakups. ‘Don’t yell at my kid!’ or ‘Mind your own business!’ or ‘You’re not my mother!’ can be very destructive to couples who don’t have a long enough history together to weather the storm.”
WHAT ABOUT THE KIDS?
There’s a joke about a client couple in their 80s who come into their advisor’s office and announce that after more than 50 years of marriage, they’re getting a divorce. “Why now, after all this time?” asks the stupefied advisor. One of them answers, deadpan (pun intended): “We wanted to wait till the children died.”
That bit of black humor touches on the reason why many boomers wait until their older years before divorcing. Advisor Shapiro’s clients often hold off on divorcing unfaithful husbands until the children are on their own. She told me, “One woman said, ‘I’ve put up with this for years. Now the kids are grown, and I don’t have to put up with it any more.’”
If the nest is slow to empty, it can prolong the period that spouses feel they have to stay together. Today’s “boomerang kids” who move back home after failing to find jobs add to the stress and frustration of parents who are unhappy together.
But as advisor Leitz notes, kids aren’t a factor in many boomer marriages. “We’re less likely to have children, or as many children, as our parents,” she points out. Since childlessness allows both husband and wife to work, divorce may still be hard on them, but perhaps not as financially and emotionally catastrophic as it could be.
‘WE’RE THINKING OF GETTING A DIVORCE’
If a client couple tells you they’re considering splitting up, how do you react?
“If a client voices that they are thinking of divorce, I would probably take them out to lunch to discuss it,” says advisor Shapiro, who helps divorcing clients make what she calls “rational decisions during irrational times.”
In one case, instead of concurring with a client’s urge to split up, she suggested the couple live parallel lives. “If he’s working, then I may encourage a non-working spouse to fill whatever the void is—get a job, pursue a new interest, make new friends, take up a hobby—to become more self-sufficient and depend less on the relationship to fill them up.” She adds quickly, “I’m not suggesting an affair.”
Unlike Shapiro, who has teaching, coaching and counseling skills in addition to holding a CFP and being a certified divorce financial analyst, some advisors may feel uncomfortable giving such direct advice. But helping someone who’s contemplating divorce to explore other options is a service that can solidify the client connection over the long term.
This can be harder with clients who are reluctant to express their fears and anxieties. Ron Rogé, chairman and CEO of R.W. Rogé and Company, a wealth management firm in Bohemia, N.Y., has seen many couples divorce during their later years. He points out, “Women value advice; but as you know, men don’t like to ask for directions. So if we’re working with a couple who are getting divorced, we know we may have to work harder at getting the man to open up and talk to us about his concerns.”
When a couple who had been long-term planning clients of Shapiro’s told her they had decided to divorce, she advised them that she and her business partner were neutral and that anything one spouse said would be fully disclosed to the other spouse. “They liked this arrangement,” she says. “Each used us as conduits to the other spouse, telling us things they knew would get back to the other.”
Clearly, dealing through a third party made communication feel safer to both members of this couple. But be prepared for other divorcing clients to seek separate advisors if they know you will share what they say.
What if a client asks you to keep their divorce plans secret from the other spouse? Shapiro says firmly, “If one person told us they were planning to divorce the other and the other didn’t know, I think I would have to recuse myself from the relationship.”
Naturally, a key topic in your discussions will be what will become of each spouse’s lifestyle after divorce. As family law attorney Van Oorschot observes, “If you’re divorcing in your 30s, you have years to recover financially. But if you’re in your 60s, your retirement plan is derailed.”
To make matters worse, baby boomers as a generation tend not to have been good savers. “When we get a boomer couple who haven’t saved well and we have to divide a less-than-adequate nest egg, that makes some of the decisions a lot tougher,” Linda Leitz says.
She points out that in the “Ward and June Cleaver model” where one spouse works and the other stays home, the game plan has usually been that the one in the work force will retire in their early- or mid-60s. When people divorce close to retirement, it can mean major changes in this strategy. “He’s going to have to work longer; she’s going to have to start making some career moves to change her financial situation; or they both may have to make changes that entail losing social class,” Leitz says. “They may go from being upper middle class to lower middle class, or from lower middle class to working class.”
In many states, the days of lavish alimony for the lower-earning spouse are passé. Advisor Leitz explains, “In Colorado, even if a woman has been out of the work force for 20 years a judge will still say, ‘She needs to be earning something, even if it’s minimum wage.’ When I make my computations, I’ll assume that she will be doing that.”
“You’re faced with ‘Do I have to get a job? Retrain?’” Van Oorschot says. “If you’ve been out of the work force for years, it’s not easy. And it’s not always possible.”
SPLITTING ASSETS WITH THE FUTURE IN MIND
Dividing assets equitably for an older couple requires close collaboration between the divorcing parties’ attorneys and you (or you and a second advisor, if each spouse is separately advised). As advisor Shapiro notes, “The investments need to be very carefully structured to provide an income stream; and be conservative because the person does not have the time horizon to survive a severe market downturn.”
Tax issues also factor into these decisions. Wealth manager Rogé points out that in New York, where assets are split in half after a long-term marriage, “clients don’t realize that some of the assets are tax-free and others have a future tax liability. You want to make sure you help clients find a solution that is equitable in terms of tax liability.”
Both parties need to have their wills redone, especially if there are children involved. Rogé’s firm refers divorcing clients to estate planners for this need.
In short, investment planning is just the tip of the iceberg for divorcés. Leitz suggests that her fellow advisors “need to figure out if the person is properly housed or house-poor. Are they overinsured or underinsured? Do they know how to set up a budget? Are they aware of how their tax situation will change when they’re single? What they really need is a comprehensive financial advisor.”
Of course, divorce is about more than money. “These people are going through one of the worst things they will go through,” says Leitz. “They need someone who’s going to be patient with them, listen to some of the emotional trauma, and help them keep from making emotional financial decisions they’ll regret later.”
This is where your patience and empathy will play a large role. Having been through a divorce myself, I strongly second Leitz’s comment that “People who are going through a divorce are going to grieve. And the qualities of grief that come out the most are fear and anger. To the extent that we can get them away from that and focused on their own strengths and the freedom of making their own decisions, the better the healing process will go.”
In my own divorce more than 25 years ago, we consulted a mediator to seek a non-adversarial settlement with joint custody, and a therapist for the sake of our young child. Therapists are involved more and more in helping couples divorce well, even if the children are no longer young.
Rogé, too, has been through the process. “On the emotional side, you’re thinking about how the children will feel about it,” he observes. “It’s usually the man who moves out, so you want to maintain a relationship with your children. In my case, my son was in college, and my biggest concern was maintaining our relationship. I see that with other male clients, too.”
RESOURCES FOR DIVORCING COUPLES
“The most important thing for financial planners is to recognize that it’s a team approach,” attorney Van Oorschot says, echoing my recent Investment Advisor series on the value of collaborating with other experts (see “When Your Advisory Skills Aren’t Enough,” May 2012). “A financial planner, a family law attorney, an insurance professional, a real estate professional if there’s a house, an estate planner, an accountant and a therapist if their emotional state calls for one: That is really the team of people necessary to help a client make the best decisions.”
In addition to finding these experts, collect stories about other clients who have taken advantage of professional help following an older divorce. Above all, cultivate an atmosphere of “exquisite listening” to clients who are mourning the death of their marriage. Encourage them to develop patience with the process of separation and divorce, which always takes longer than they think it will.
Last, remind clients that (as Ron Rogé says) “it’s dark when you’re going through this, but there’s light at the end of the tunnel.” By staying at their side throughout this difficult transition, you’ll help build relationships strong enough to withstand whatever may happen in the future.
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