Becoming newly single in your 50s or beyond can present a set of financial and retirement planning challenges. No matter why you’re in this situation, there are a number of steps you can take. Let’s jump in.
At this point, perhaps, the most important thing you can do is take inventory of all your financial accounts, including your:
You will also want to review all your sources of income. This might include income you earn from a job, and pay or receive for alimony. If you’re already retired, you’ll also want to check the distributions you get from a pension, both your own and a former spouse's.
Speaking of retirement: Pay special attention to everywhere you saved and invested for your golden years. Think 401(k)s or similar employer sponsored plans, IRAs, taxable investing accounts and annuities.
And don’t forget any account that you could inherit after a spouse passes or that will come your way because of a divorce settlement.
Now, you should have a good idea if what’s coming in will sustain you in your newly single life. If not, and you’re still working, it could be a good time to make catch-up contributions to your 401(k) or IRA, and ensure you are receiving the maximum match from your employer.
If you are self-employed, you will want to be sure that you have a self-employed retirement plan such as a solo 401(k) or SEP-IRA, and that you are contributing to that plan.
Social Security benefits are a key component of retirement income for most retirees. In the event of a divorce or the death of a spouse, you might have options when claiming your benefit.
You can always claim your own benefit. If your own benefit is higher than your former spouse, claim your own benefits.
But every situation is different, and sometimes that decision has more nuance, like in the case of survivor benefits.
Survivor benefits are based on a late spouse’s benefit, which is based on their earnings record. If the surviving spouse has reached their own full retirement age, they can generally collect 100 percent of the deceased spouse’s benefit.
You are generally eligible for survivor’s benefits if:
Additionally:
Note that if you are eligible for Social Security benefits based upon your own earnings history, your benefit will be the higher of your own benefit, a survivor’s benefit, or in some cases a combination of the two.1
If you are single due to a divorce, you still may be eligible for spousal benefits and/or survivor’s benefits in some cases. You can receive a spousal benefit from a divorced ex-spouse only if that benefit will exceed your own Social Security benefit based on your own earnings record.
The main rules for qualifying include:
These rules vary a bit if your ex-spouse becomes deceased prior to your filing for benefits.
In the case of a divorce, claiming benefits based on your ex-spouse’s earning record will have no impact on their benefit, or the spousal benefit of their new spouse if they’ve remarried.2
Social Security is a key retirement benefit, so be sure to determine your best option, whether your own benefit or one based on your ex or deceased spouse’s earning record.
You will also need to review your beneficiary designations on life insurance policies, annuities, and retirement accounts such as an IRA or 401(k). In most cases, you will want to name another primary beneficiary in lieu of your ex. An exception to this might be as the result of a requirement to leave them in place as the result of a divorce settlement. You will also want to review all contingent and secondary beneficiaries as well.
This review should extend to your will, any trusts that might be in place, as well as joint ownership of bank accounts, real property, and other assets.
Neglecting to make appropriate updates to assets and estate planning documents could result in an ex-spouse inheriting them despite your intentions to the contrary in a divorce. In the event of the death of a spouse, it’s still important to review your estate planning beneficiaries and all related documents to ensure that all assets will go to the beneficiaries of your choice.
Tax planning is critical for the newly single. Tax brackets are different for single filers, as are some deductions. Note that in some cases a widow or widower may be eligible to file as married and joint for up to two years if certain requirements are met.
Newly single filers may find themselves at different income levels than when they were married. If you're still working, it’s important to review your withholding to reflect your current income level. Also note that certain deductions such as the standard deduction change based on your filing status. This should factor into your tax planning.
For anyone who becomes newly single in their 50s or older, it's important to look at the changes this new life situation will have on your ongoing income and expenses, as well as your longer-term financial and retirement planning. Whether this is the result or a divorce or the death of a spouse, everyone’s new financial situation will be different. Be sure to take the time to determine what this change means for your ongoing and long-term situation. If you have a financial advisor, definitely work closely with them in this planning process. It's important to make the best of your new situation financially to allow you to support your lifestyle.