Rebuilding After "Gray Divorce": Finding Your Footing

by Amanda Vaught

Divorce is difficult at any age. But when it happens after age 50—often called "Gray Divorce"—the financial stakes are fundamentally different.

In your 30s, you have decades of earning power ahead of you to recover from a split. In your 60s or 70s, you are likely nearing the finish line of your career or are already retired. The assets you have are the assets you have. Splitting them in half isn't just a math problem; it's a longevity problem.

I work with many clients like Constance—retired, responsible, and deeply protective of the nest egg she has built. Constance's primary fear is running out of money or becoming a burden on her children. When a late-in-life divorce occurs, those fears often spike. The question shifts from "How do we plan for our future?" to "Will I be okay on my own?"

A Lesson in Unraveling

With divorce rates so high, all of us have seen money disappear in seemingly stable families after a divorce. The reasons are varied but include emotional behaviors fueled by depression, anxiety, and even revenge.

When a client faces a divorce later in life, we guide clients to make financial decisions in their best interests. Finding the clarity to make financial decisions during an emotionally charged time, such as during a divorce, can be all but impossible. That's what we're here for. Here is how the math changes for a retiree like Constance in 2026.

The Tax of Being Single

The biggest shock for newly single retirees is often their tax bill. You might assume that having half the household income means you will pay half the tax. Unfortunately, the US tax code doesn't work that way.

1. The Filing Status Trap

When you switch from Married Filing Jointly to Single, your tax brackets compress significantly. In 2026, a married couple can earn up to $211,400 before they leave the 22% bracket and jump to 24%. For a single filer, that jump happens at just $105,700.

If Constance retains a pension or large IRA distributions, she might find herself in a higher tax bracket as a single person than she was as a couple, even with less total income.

2. The Standard Deduction Drop

As a married couple over age 65, the 2026 Standard Deduction is $32,200 plus $1,650 for each spouse. As a single filer over 65, Constance's deduction drops to $16,100 plus $2,050. She loses nearly half of her deduction, which means more of her income is exposed to taxes.

3. Medicare Surcharges (IRMAA)

Medicare premiums are based on income. The surcharge threshold for singles kicks in at $109,000 of income, whereas for couples it is $218,000. If the divorce settlement leaves Constance with income-generating assets that push her over that $109k line, her Social Security check effectively shrinks because her Medicare premiums go up.

Fairness and Beneficiaries

Constance worries constantly about her children: "Will they be financially responsible? How can I maintain fairness between them?".

Divorce complicates this. You must immediately review your beneficiary designations. We call these "Phantom Beneficiaries"—ex-spouses who are still listed on 401(k)s or life insurance policies. Federal law often overrides state divorce decrees on retirement accounts. If your ex is listed, they get the money, regardless of what your new Will says.

For Constance, rebuilding her plan means ensuring her assets go to her children as she intends, protecting that legacy from accidental disinheritation.

Watch: Your Money Personality Matters

Navigating a divorce isn't just about spreadsheets; it's about psychology. Are you "Money Vigilant" (anxious and watchful) or "Money Avoidant" (ignoring the details)? Understanding your bias is crucial when negotiating a settlement. In this video, my co-founder, Emily, and I break down how these personalities drive our decisions.

You Will Be Okay

Rebuilding after a gray divorce involves grief, but it also offers a chance to take full control of your narrative. We help clients like Constance run the new numbers, adjust the plan, and answer that big question—"Will I be okay?"—with a confident "Yes."

If you are facing a transition and need a partner to help you sort through the logistics, we are here to help.