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Retirement Lifetime of assets on the line when over-50 couples split

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Divorce can be financially crippling at any age, but for couples over the age of 50 who split – so-called grey divorces – the implications are particularly devastating.

Even if the divorce is amicable, experts say, couples who have spent decades planning for a retirement that involves one household must now consider how to make that nest egg stretch for two. And if there isn't enough, the divorcees have little time to rebuild assets.

"Most people don't go into marriage expecting a divorce – they go in wanting happily-ever-after," says Chris Buttigieg, a Toronto-based senior manager of wealth planning strategy at Bank of Montreal. "They're not prepared for divorce, at any age. The first step has to be what we call recalibrating – to get your financial house in order."

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Grey divorces are considered a boomer trend, with a growing number of Canadian couples over 50 seeking to untie the knot. Statistics Canada stopped tracking divorce in 2008, but its last report revealed over-50s as the only age group with a rise in divorce numbers.

In some ways grey divorces are like any other: Legal bills can run high in the case of prolonged, bitter fights and the price of setting up a new household is usually much higher than half the expenses you paid when you were half a couple.

But experts say the bigger problems often come in splitting a lifetime of assets – from the marital home to other property to investments and registered retirement savings plans to insurance policies, private pensions, work options and even businesses owned by the couple. Each asset has its own tax implications, Mr. Buttigieg says, and will require expert help to figure out its worth over time.

"It's not just, 'Okay, you take half the house, here's your pension, I'm going to take all the RRSPs,'" says Tina Schultz, a Calgary-based certified divorce financial analyst, who works with divorcing couples to divide assets.

Analysts such as Ms. Schultz collect financial data from both members of the divorcing couple, then use a computer program to project into the future. She considers everything from how much tax a person will have to pay when cashing in RRSPs to whether one or both members of the couple are willing and able to work later in retirement.

"There are so many different ways to split assets," she says. "Let's say he owns the company and she received a share in it and took the cash instead. I can project how much money this guy's company is going to make him in the next 30 years, and it's going to show where she is, maybe depleting her money. Her money isn't making interest and his company is growing. He's going to be a millionaire in 20 years and she's going to be living off welfare.

"Then we will go back and tweak the numbers."

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Many final agreements don't have assets split exactly 50-50, Ms. Schultz says, but both members of the couple have to approve the plan.

The first step in drawing up any agreement is to get the couple to discuss the retirement plan they had in place, if there is one, and figure out their new individual goals – how they want to spend their retirement.

Clarifying and setting new goals is "a huge starting point," especially when both sides are involved, says Eva Sachs, a certified divorce financial analyst who practises in Toronto.

The difference between grey-divorce clients and younger couples she sees is that they are "mature enough to know that whatever decisions they make and how they approach this is going to affect them for the rest of their lives." That doesn't necessarily mean the couple is getting along, but that they much more aware that the process can be beneficial. Once they articulate their goals, the analyst looks at dividing up assets and liabilities – many couples have some debt – and considers their future income and expenses.

Finances can be tricky: In some cases, for example, couples may have planned to use the equity in their home to fund their retirement. The divorce means that the one house has to fund two retirements, the spouses have to find new places to live and sometimes they can't wait until the market is doing well to sell.

"The divorce may be triggering the timing of selling the house and that may not be the best timing," she says.

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Mr. Buttigieg says that while deciding their financial future, people getting divorced should also take the time to make estate-planning decisions, from changing their wills to deciding who their power of attorney should be.

Ms. Schultz believes everyone needs to be better prepared for divorce, saying that many couples have one spouse who deals with finances while the other knows very little. "Get to know your finances," she advises.

That's especially true if you think you want a divorce.

"You just don't go in and say, 'Hey I want a divorce' because that's when the fighting begins. You need to get educated first, is all I have to say."

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