Divorce decree While divorce is becoming less common among the younger set, according to a report from the Pew Research Center, that's not the case for older people. (Photo: Fotolia)

A couple that's worked hard during their longterm marriage to raise the kids, pay the bills and save for retirement has finally reached that time of life when they're actually giving serious thought to what retirement could be like once they leave the workplace.

But if they end up divorcing, both could be in real trouble when it comes to retirement.

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So says a Washington Post report, which highlights why so-called gray divorce is such a threat to retirement.

And it's an increasingly common one, too: While divorce is becoming less common among the younger set, according to a report from the Pew Research Center, that's not the case for older people. In fact, says the report, "Among U.S. adults ages 50 and older, the divorce rate has roughly doubled since the 1990s."

And among those 65 and older, the rate has escalated even further, roughly tripling since 1990, hitting six people per 1,000 married persons in 2015.

Some of the reasons include couples whose kids are grown and gone, at which point they no longer feel the need to stay together "for the sake of the kids"—or the realization that they'll be spending the next 20–30 years in even closer proximity to each other than they did when they were working.

If the working years were a challenge and they've grown apart over the years—or decided they really don't like each other very well—the prospect of another two to three decades in one another's company may be just too much to face.

However, divorce coming at a time of life when either a person's peak earning years have already passed or when they no longer have a job at all endangers any common retirement funds that person and his or her spouse may have accumulated.

"Gray divorce potentially endangers retirement for both parties, since they may be living on half the income they'd expected to have and may feel resentful about their change of plans," Tim Sobolewski, president of the Financial Planning Center and Wendy B. Pegan, founder and director of the Creative Relationship Center, write in the report.

They add, "Whatever money the couple has in 401(k) plans, individual retirement accounts, 457 or 403(b) accounts and pensions will usually need to be divided—often with that pricey legal tab."

IRA transfers have to be done properly, they point out, lest they subject the owner to taxes and penalties, and attorneys should be up on the requirements for Qualified Domestic Relations Orders.

"Unfortunately, all of these property divisions have the same effect as starting to save too late in life for retirement, or suffering a major loss in the market: There are no longer enough working years to make up the loss," write Sobolewski and Pegan, continuing, "The greatest financial fear for most retirees is running out of money before they run out of life span."

Scott Hanson, a certified financial planner, writes in the report, "[O]lder people, while usually not involved in long, drawn-out child custody battles, have less time to rebuild financially, which means divorce can literally be a fight for your future standard of living." Hanson adds, "It's difficult to recover from divorce when you're older because, after 50, you're more likely to have maxed out your earning potential, your assets may be mostly fixed, and your employment opportunities tend to become more limited. And while it's true that older divorcers generally have more assets than younger people, they often don't have as much money as they think they do."

Getting caught up in a court fight over who keeps which assets can eat up those assets, leaving little or nothing for people who never expected to have to get by on half what they anticipated.

So perhaps others might find that if one partner continues to hold a job, thus limiting time at home to more or less what it was before retirement, a divorce might not be the only answer to incompatibility.

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Marlene Satter

Marlene Y. Satter has worked in and written about the financial industry for decades.