Divorce between 40 and 55 can delay retirement by up to 10 years. Here’s how to plan your finances properly

Divorce is costly at any age, but couples who separate between the ages of 40 and 55 often suffer the most, reducing their retirement savings. For many, it means selling the family home they’ve been trying to pay off and taking out a mortgage again.

“Divorce in your 40s and 50s can change your financial world,” says Karen Erickson, a certified financial planner who is a senior financial advisor at IG Private Wealth Management in Kelowna, BC. He says the breakdown of someone in Generation X. “will have an impact on what kind of housing you can have now, when you retire and your dreams of what your retirement life will be like. what will it look like.”

He estimates that divorce between the ages of 40 and 55 can delay retirement by up to 10 years. Restructuring and getting back to basics is important. Mrs. “You need to know where you can live, how you can save and how you can get some of those dreams back,” says Erickson.

According to Statistics Canada, the average age at which Canadians divorced in 2020, the most recent year for which data is available, was 46. That number has steadily increased to from 36.2 years in 1980.

A StatsCan report published in 2022 shows that there has been a steady increase in the age of marriage for couples who divorce, from 23.7 years in 1980 to 30.7 years in 2020. divorce, to 15.3 years in 2020 from 12.5 years in 1980.

Olivia D’Ammizio, a partner at Shulman & Partners LLP, a family law practice in Toronto with offices in Vaughan, Ont., and Ottawa, says getting married at an older age can mean that people would brought goods to the people’s organization. These are “joint” and must be divided equally if the separated couple does not sign a marriage contract (or a cohabitation agreement in a common law relationship) which can cause disputes and increase legal costs.

The firm is seeing more divisions among 40- to 55-year-olds as a result of the COVID-19 crisis, which it says has “forced people to reassess where they are and where they are.” where do you want to be.” Couples of that age were affected by the pressures of working from home, which brought about “a big change in their lives,” he explains, such as downsizing or loss of income brought about by the global pandemic.

“Money has always caused conflicts and divorces, but what I have seen is the long-term effect of the COVID of trying to make it work from 2020 and realizing that it will not work,” Ms. D’Ammizio say, realizing that Gen Xers have more. mortgage and are heavily impacted by the economy.

Shannon Tatlock, certified financial advisor at Kevin R. Williams Financial Services Inc. and president of Red Sky Financial, Moncton, NB, says Gen Xers may end up selling homes and toys like RVs and boats at a loss, just when they should be putting money aside for retirement.

“I’ve had many conversations with recently divorced clients who want to retire at 63, and it’s just not possible,” he says. “That would be very hard to hear.”

Ms Tatlock, 40, is divorced in 2021, so she knows the stakes and implications. He is working towards becoming a Chartered Financial Divorce Specialist, which allows him to help couples come up with a plan that will keep legal costs in check while dividing their assets.

Drafting a separation agreement is a big part of the process, and both parties count their assets on the date of marriage and separation. This includes property, bank accounts, investments, registered retirement savings plans (RRSPs) and pensions. The person with the superior family property must make an equity payment to the other.

Ms Tatlock says keeping the process smooth and “minimum combat” is essential to avoid lengthy and expensive legal battles. Her divorce was amicable, but the couple still paid a total of $8,000 in legal fees.

The best plan for divorcing couples in their 40s and early 50s is to limit the number of homes they each move into, Ms. Tatlock says. Budgeting — or cash flow planning, as he calls it, so his clients “don’t get too broke” — is important. People who used to split the cost of housing, utilities, insurance, car payment, etc. are surprised by how much it adds up.

Ms. Erickson says some people rent after a divorce and save their investment for retirement, while others buy a home with a down payment from their retirement savings in hopes that their money will of the home will pay for their old age. He advises buying, noting that new rules on first-time homebuyer plans mean that if you divorce and sell the marital home you can get up to $35,000 from your RRSP to to the payment of the house price.

Ms. Tatlock said some Gen Xers who are divorcing may rely on elderly parents to give them money as a gift or inheritance, “but I tell people not to bank it.” He realizes that people are living longer and may need their money; One in four Canadians is expected to live to 100.

Divorce is a wake-up call that causes many people in their 40s and 50s to focus on future plans, Ms. Tatlock says. Many approach new relationships with their eyes open, keeping their finances and even families apart. Those who end up cohabiting or remarrying often make cohabitation agreements and prenuptial agreements so that “whatever’s mine is mine, and what’s yours is yours.” yours.”

Mrs. Tatlock points out that such agreements can be written at any time, even for a long time, as long as both parties agree.