A growing number of Australian couples are deciding to end their 20-year plus marriages with significant impacts to their finances and their retirement.
Known as “grey divorce’, these later in life marriage breakdowns are an increasing trend in the US with statistics showing a similar pattern in Australia.
According to the Australian Bureau of Statistics, in 1998 the median age for divorcing men and women was 40.5 and 37.8 respectively. This has now increased to 45-49 for men and 40-44 for women with a growing number of marriages ending after more than 20 years (28% of all divorced couples compared to 20% in 1990).
We all know that divorce has devasting emotional and financial impacts but what does this mean for people heading into or already in their retirement years?
In your later years, there is less time available to recover financially from divorce and this can lead to increased angst and stress for divorcing parties.
It is likely however that there will be a bigger pool of assets to be divided in terms of home value and superannuation, and this can be done through formal written agreement, consent order or if an arrangement cannot be made, through a court order.
Being the largest asset and also a place which often has a great deal of emotional attachment, the family home can be the biggest battle ground when trying to reach a settlement.
In many cases, it can make sense to sell the family home – liquidating the asset and dividing it up so that parties avoid becoming asset rich, cash poor in retirement.
But what if the family home is more than just a property, there’s kids still living in it or a strong family history attached to it – how do you carve it up then?
Typically, one of the parties would buy the other out and could do this by taking out a loan or receiving some superannuation or other assets in exchange for the equity.
If loans are not available to you however due to age or other circumstances, or there are no super or other assets to divide, a reverse mortgage can be a viable solution.
Scott Phillips, CEO and Managing Director of Smooth Retirement said home equity can be turned into a lump sum of capital which can be used to buy or partially buy out one of the parties as part of the overall property settlement.
“As there are no repayments required on reverse mortgage until the house is sold, the remaining party can continue to live in the home for as long as they choose, selling it at a later date, when they downsize or ‘right size’.”
Mr Phillips said strict lending criteria meant that borrowers could not loan more than 45% of the total value of the home, ensuring there was sufficient equity for later in life.
“It is always recommended that people seek professional advice when considering using some of the equity in their homes and that they make sure they fully understand any agreement before entering into it.”
Smooth Retirement are retirement income specialists and licensed equity release planners and brokers. For more information call 1300 510 015 or click HERE to book your free, no obligation reverse mortgage eligibility check.
Smooth Retirement Pty Ltd provides equity release broking and retirement income planning Australia-wide. ABN: 46 619 010 445; AFSL 510015; Australian Credit Licence: 510015; smoothretirement.com.au; email@example.com; 1300 510 015.