Gray divorce upends retirement plans — how advisors can help

Gray divorce — the term for couples splitting at age 50 or older — is one of the most financially disruptive events a client can face late in life, and it is becoming increasingly common. Since 1990, the divorce rate among Americans aged 50 and older has more than doubled, according to the National Center for Family and Marriage Research, and today approximately 40% of all divorces in the United States occur between couples older than 50, according to data cited by The New York Times. Unlike divorce earlier in life, untangling decades of joint retirement planning leaves clients with little time to recover — and the financial stakes have never been higher.

A July 2025 study by Allianz Life Insurance Company of North America found that 56% of married Americans said a divorce would derail their retirement strategy, rising to 67% among Hispanic respondents. For financial advisors, gray divorce is no longer a peripheral concern. It is a planning challenge that demands immediate, income-focused intervention.

The biggest mistake: letting emotion drive permanent decisions

Tracy Byrnes, vice president of Women and Investing at Lebenthal Global Advisors, a full-service registered investment advisor based in Hauppauge, New York, says the single most destructive pattern she sees in mid-life divorce is clients making permanent financial decisions based on temporary emotions.

"At mid-life, retirement is no longer an abstract concept," Byrnes said. "You're close enough that every financial decision has a meaningful impact on your future cash flow. So before you settle — stop asking yourself, 'Am I getting half?' and start asking, 'Will this generate the income I need to retire?' That's a very different conversation."

Byrnes begins every gray divorce engagement with a complete inventory of assets — income sources, pensions, Social Security benefits, retirement accounts, stock compensation, and insurance — and then projects future cash flow rather than simply calculating net worth. The distinction matters because a large account balance and a reliable income stream are not the same thing.

"Many people are surprised to learn that a million-dollar retirement portfolio doesn't necessarily translate into financial security if it isn't producing enough income," Byrnes said. For clients who were not the primary breadwinner, that rebuilding process often involves delaying Social Security strategically, evaluating part-time work, and investing for both growth and reliable income.

Illiquid assets — real estate, family businesses, vacation properties — present a particular challenge. Under the pressure of divorce, clients frequently assign emotional value to those assets that exceeds their actual financial value, according to Byrnes.

"A fair settlement isn't necessarily an equal division of every asset," she said. "Sometimes one spouse keeps an illiquid asset while the other receives more liquid retirement assets that provide flexibility and income. The question isn't, 'Who gets the house?' It's more about — 'Which combination of assets gives each person the best chance of financial independence going forward?'"

Time, she adds, is the variable that changes everything in a gray divorce. "A 35-year-old has decades to recover from financial mistakes," Byrnes said. "Someone divorcing at 58 doesn't."

Hire the right professionals — in the right order

Pam Friedman, managing director and principal at Robertson Stephens, a wealth management firm based in Austin, Texas, with more than 30 years of financial planning experience, says two preventable mistakes surface at the start of almost every gray divorce engagement: clients rush to divide assets before fully understanding what they have, and they hire an attorney before identifying what kind of professional guidance they actually need most.

"A mid-life divorce is uniquely vulnerable to financial missteps," Friedman said. "It is a time of life when assets may be significant and complicated. While younger couples have time on their side to recover from financial mistakes, mid-life couples do not have the same luxury."

Friedman starts by gathering financial documents and preparing a full personal balance sheet — what attorneys call an inventory. Looking inside accounts matters: a brokerage account may contain low-basis stock or private investments that require different handling at division; a tax return may reveal valuable loss carryforwards or previously undisclosed assets.

Her advice on professional sequencing is direct. A Certified Divorce Financial Analyst, or CDFA — a specialist designation for advisors who focus on the financial dimensions of divorce — should often be engaged before a family law attorney, unless there is abuse or illegal financial conduct such as hidden assets.

"If money is an issue, hire a CDFA first," Friedman said. "Divorcing couples need to recognize that hiring more professionals can be less expensive in the long run, not more. Good divorce professionals — like family law attorneys, divorce coaches, and couples therapists — know they don't have time to keep up with ever-changing financial or tax issues. They are the ones that bring financial professionals to the table."

Post-divorce projections are also central to Friedman's process. She builds income and spending models based on assumed asset divisions to identify gaps — points where a client will need to work longer, spend less, or both. She also ensures that financial obligations tied to an ex-spouse are accounted for, including what happens in the event of that ex-spouse's disability or death.

"We can't spin straw into gold, but our clients gain financial literacy and are better prepared to move forward with their financial lives," Friedman said.

Rebuilding retirement when the breadwinner leaves with half

Kevin Thompson, founder and CEO of 9i Capital Group LLC, a Fort Worth, Texas-based wealth management and financial planning firm, says one of the most common and damaging errors he encounters is clients attempting to move assets too quickly — a move that can be misread as an attempt to shield those assets from the divorce process and create costly legal complications.

"A bigger issue is that many people don't fully understand their overall financial picture," Thompson said. "In a gray divorce, failing to identify and value all assets can lead to an inequitable distribution, causing more money to resolve."

For the primary breadwinner required to transfer a portion of a retirement account, Thompson says the rebuilding path — while requiring time — is more accessible than many clients assume. That spouse still has the income necessary to save, and dollars previously directed toward joint goals can be redirected toward individual retirement targets, subject to child support or alimony obligations.

Illiquid assets, including businesses and investment properties, can often be handled through offsets. A more liquid asset — cash, or a marketable securities account — can be used to buy out one spouse's ownership interest, creating a cleaner division without forcing a sale. Alternatively, one spouse may assume a larger share of jointly held debt in exchange for retaining the illiquid asset.