Retiring Wise Blog

Silver Divorce and Reverse Mortgages

Written By: Lindsay Schachinger

One common perception in today’s society is that 50% of all marriages in the U.S. will end in divorce. Although this may be true, trends in the divorce rate are found to be contradictory across generations. Surprisingly, millennials are divorcing at much lower rates than baby boomers and those who were a similar age during the 1970’s and 1980’s, according to Forbes. This is due to a variety of reasons, some of which include waiting longer to get married, not having the finances to get married, a decrease in the percentage of those actually getting married and cohabitation on an upswing. Baby boomers, on the other hand, have had increasing divorce rates year over year.

The significant amount of older American’s getting divorced later in life may come with a more extensive and messy divorce process. While baby boomers may not have to deal with custody agreements for their children, many have acquired one of the largest assets in their life – their home. This can be one of the most complex assets to divide between a couple. The home isn’t the only worry. With retirement approaching much sooner for baby boomers, they must also think about their retirement funds. And many build their retirement fund based on having financial support from their spouse. Needless to say, when baby boomers separate, they may face a financial hardship in which their retirement income may no longer be sustainable for the rest of their lives. This can cause a domino effect in baby boomers lives, forcing them to sell other assets or re-enter the workforce. Many retirement incomes come in the form of a 401K or an IRA. Once divided, some people may only be left with a spousal benefit from Social Security, creating a major deficit in retirement income.

What many baby boomers fail to recognize as a supportive function in divorce is the reverse mortgage. The home is typically the largest asset between ex-spouses. If one spouse wishes to stay in the home, a reverse mortgage could benefit both parties. The reverse mortgage can eliminate the burden of making a monthly mortgage payment for the individual who chooses to continue to live in the home. Though, they will still need to pay property taxes, homeowners insurance, and home maintenance costs.

A reverse mortgage allows ex-spouses to receive the finances they need to equally divide their home. One individual is able to stay in the home without a mortgage payment, while the other receives the remaining money from the reverse mortgage. This money can be obtained in the form of a lump sum, monthly payments, a line of credit or any combination of the three.

This financial support can help consolidate debts, or help borrowers delay drawing from Social Security, their 401K or other retirement assets. This enables many baby boomers to reestablish a suitable retirement income plan.

Learn more about how a reverse mortgage works by calling one of our licensed specialists today. We also recommend consulting with your financial or legal advisor to fully understand the implications that a divorce may have.

Ready to take the next step? Now is the perfect time!

Call to speak with a licensed specialist (800) 401-8114

Reverse Mortgages and “Silver” Divorce