Planning for the unexpected in retirement: divorce or breakdown of your relationship

By Linda Lamarche, CFP‌Ⓡ‌ 15 June 2022 4 min read

Even if you’ve done great retirement planning, and anticipate your desired level of income will last throughout your lifetime, there are unexpected events that can derail your plans. In this series, we cover four scenarios, and how to mitigate risk and ensure your future is protected no matter what happens.

At any age, experiencing a divorce or the breakdown of a relationship can be both financially and emotionally devastating. However, the breakdown of a relationship later in life will magnify the consequences. 

According to a Statistics Canada report, A fifty-year look at divorces in Canada, 1970 to 2020, divorce rates since the mid-2000s have declined for young adults, but have remained constant for persons aged 50 and over. And, although the rate of later-in-life divorce is not increasing, the average age of divorce has been continually rising. In 1980, the average age of divorce was 36.2 years and it’s now closer to 46 years of age.  

Unlike couples who separate at an earlier age, for those splitting up in their 50s, 60s, or older, there are limited options for rebuilding wealth and making up for any income shortfall. Half of your assets and income sources are no longer available, your individual cost of living will likely increase and assets such as a home, vehicle, appliances and furnishings will have to be replaced for one of the spouses. This division of assets and increased individual cost results in reduced cash flow for both parties and often a requirement to take on additional debt. 

Although you may not be able to eliminate the risk of divorce or separation, there are things you can do during the relationship and after to protect yourself and mitigate risks: 

  • Consider a prenuptial or cohabitation agreement. This may feel unromantic and be the last thing you want to think about as you start your new life together, but it’s an opportunity to plan for the future while you are happiest together. This type of agreement protects both spouses from unfair treatment should a divorce or breakdown of the relationship occur, and ensures there are no surprises. The process will also give you an opportunity to better understand the needs, goals and concerns of your spouse or common-law partner as you both are committing to the relationship.1
  • Be sure you actively participate in the household finances and investments. According to a 2021 UBS study, Own Your Worth report, only 20% of couples participate equally in financial decisions and seven in 10 men indicate they take the lead on long-term financial decisions.2 According to the report, when women defer to their spouses this is due to a belief they are lacking financial knowledge (82%), a lack of interest (73%), or that they don’t have time to participate in financial discussions, as they largely shoulder the burden of household responsibilities (78%). Regardless of gender, to protect yourself from the unexpected and lessen any surprises, both individuals in the relationship need to be actively involved in managing the family’s finances. If you haven’t already, it’s time to take an active role. Not only does this provide you with greater clarity of your joint financial picture but also greater confidence should a divorce or breakdown of relationship occur. 
  • Understand your post-relationship financial picture. After divorce or the breakdown of your relationship you’ll need to understand what your new financial picture looks like, including all assets and income sources and how the divorce impacts your future spending. We recommend you work with a financial planner to develop a comprehensive financial plan that covers not just retirement planning but also financial management, risk management, investment planning and tax and estate planning. 

Although not specific to late-in-life divorce, the ATB Wealth article Financial considerations when going through a divorce discusses steps to help you navigate your divorce or breakdown of relationship and move forward with confidence.  

There are many other unplanned situations you may experience in retirement that could create havoc with your finances. Regardless if the situation is one we’ve discussed above, or some other incident such as an unexpected health event, your adult children requiring financial assistance or an unexpected home maintenance cost, basic financial management strategies can help mitigate such events. Having an emergency fund, ongoing budgeting and making appropriate adjustments to your financial plan are essential for protecting your financial security. 

Retirement planning doesn’t stop once you start retirement. It is important that there is ongoing review of your financial plan and the assumptions that have been made. You may have to adjust your goals or make adjustments for life expectancy, inflation, your investment allocation or withdrawal strategies. An ATB Wealth advisor can work with you to review and monitor your plan and keep you on the path to reaching your lifetime goals. 


Read more articles below to learn about other common scenarios that can impact retirement and how to create a plan that protects your goals.

Planning for the unexpected in retirement

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