‘I don’t own a home’: I’m 62, unemployed and have $1.5 million for retirement. Can I afford to divorce my husband?
Short answer: It’s possible, but the answer hinges on three things you must model carefully—how much of that $1.5 million you would keep after the divorce, what your ongoing housing and healthcare will cost as a single person, and how you coordinate withdrawals with Social Security. If your post‑divorce assets are closer to $1.5 million, you likely have ample flexibility. If they end up closer to $750,000 after a split, you can still make it work with a modest budget, thoughtful claiming strategies, and possibly some part‑time income or a lower‑cost location.
Start with the realistic post-divorce balance
What matters is not what you have now, but what you will have in your own name after property division. In many states, retirement accounts and savings accumulated during marriage are marital property and may be divided (via QDRO for qualified plans). If “your” $1.5 million is mostly marital, you may end up with around half, give or take—call it $600,000 to $900,000 after legal costs, depending on state law and negotiation. If some or all of it is separate property (pre‑marriage, inheritance kept separate), document that before negotiations.
What a sustainable draw looks like
Think in terms of a sustainable withdrawal rate, not the old 4% rule. For a 62‑year‑old renter without a guaranteed pension, target 3.0% to 3.5% before Social Security, especially given rent inflation risk.
– If you keep $1.5 million: 3.0%–3.5% supports about $45,000–$52,500 per year from investments before tax. Layer in Social Security later, and your margin improves significantly.
– If you end up with $750,000: 3.0%–3.5% supports about $22,500–$26,250 per year before tax.
Add Social Security strategically
At 62 you can file now, but benefits are permanently reduced. If you can bridge with savings and delay to full retirement age (66–67) or even 70, you materially improve lifelong income and inflation protection.
– On your own record: Each year you delay from 62 to full retirement age reduces the early-claim penalty; from full retirement age to 70, benefits rise ~8% per year.
– Divorced-spouse benefits: If you were married at least 10 years, are divorced, age 62+, and currently unmarried, you may claim a divorced-spouse benefit up to 50% of your ex’s full benefit (PIA) at your full retirement age. If you qualify, that can meaningfully reduce the strain on your portfolio. You can claim even if your ex hasn’t filed, provided you’ve been divorced at least two years and both are age 62+. If you’re close to a 10-year anniversary, it can be financially smart to delay the divorce until you cross that threshold.
– Survivor benefits: If your ex dies first and you qualify as a divorced surviving spouse, you could receive up to 100% of their benefit, subject to claiming-age adjustments.
Housing is the swing factor
Not owning a home leaves you exposed to rent inflation, which can outpace general inflation. This is the single biggest variable in your plan.
– As a renter: If your post‑divorce budget (excluding rent) is, say, $18,000–$22,000 per year, then with $750,000 and a 3.5% draw plus a moderate Social Security benefit (for example, $1,500/month at FRA, less if earlier), you’re likely targeting rent of roughly $1,700–$2,500 per month to keep the plan resilient. Higher rents are possible if you delay Social Security and/or add part‑time income.
– Buying later: Paying cash for a modest home can reduce long‑term housing inflation risk, but it ties up liquidity. For example, buying a $400,000 condo would leave $1.1 million invested; your ongoing carrying costs might be $8,000–$12,000 per year instead of $30,000 in rent, materially lowering required withdrawals. Consider this trade‑off once you know your final asset split and where you want to live.
– Geographic arbitrage: Moving to a lower‑cost city (and ideally one with good public transit and healthcare) can increase your safety margin more than any investment tweak.
Mind the healthcare bridge to Medicare
Divorce often removes access to a spouse’s employer plan. At 62, you need coverage until Medicare at 65.
– COBRA: Available up to 36 months post‑divorce but often expensive.
– ACA marketplace: Premium subsidies depend on income (Modified Adjusted Gross Income), not assets. Careful planning of withdrawals and Roth conversions can keep MAGI in subsidy‑friendly ranges. This is a major reason to coordinate taxes and withdrawals with a planner.
– At 65: Evaluate Medigap vs. Medicare Advantage, and watch the IRMAA cliffs if income spikes.
Taxes and the mechanics of division
– Use QDROs to divide qualified retirement plans without current taxes or penalties. IRA splits are done via trustee‑to‑trustee transfer pursuant to the divorce decree.
– Post‑2018 divorces: Alimony is not deductible to the payer nor taxable to the recipient federally; state rules vary.
– Capital gains: If you’ll need to sell appreciated assets to fund living expenses, model the tax impact. Consider harvesting gains strategically in lower brackets pre‑Social Security.
– Roth conversions: Low-income years between 62 and 70 can be ideal for partial Roth conversions, improving future tax flexibility and reducing Medicare IRMAA later.
Sequence-of-returns risk and portfolio structure
When retiring into market uncertainty, the order of returns matters. Reduce the chance of a bad early sequence by:
– Holding 2–3 years of essential expenses in cash or short‑term Treasuries.
– Building a TIPS ladder for years 3–10 to cover a rent‑adjusted baseline.
– Keeping long‑term growth exposure (global equities) for inflation protection.
– Considering partial annuitization (e.g., a low-cost SPIA or a QLAC inside an IRA) to cover a slice of core spending you can’t easily cut, especially housing and food. Don’t annuitize funds you may need for a home purchase.
Protect against the big wildcards
– Long‑term care: Either price a policy you can actually keep or earmark a reserve in your plan. A modest, targeted policy that coordinates with assets can be viable; otherwise, plan for a self‑funded approach and understand Medicaid rules in your state.
– Insurance and estate basics: Update beneficiaries, powers of attorney, health care proxies, and your will. If your ex has a pension, address survivor options in the decree.
– Credit and cash: Ensure you have credit in your own name and a 12–24 month emergency fund to smooth the transition.
What this looks like in numbers
Illustrative only:
– Scenario A: You retain $1.5 million, rent is $2,500/month ($30,000/year), other spending $20,000, healthcare $6,000 net of subsidies. Total $56,000/year. A 3.5% draw covers $52,500; a small early Social Security or part‑time work fills the gap. Delaying Social Security to at least FRA improves long‑term safety.
– Scenario B: You retain $750,000, same expenses total $56,000/year. A 3.5% draw gives ~$26,250. To close the gap, you would likely need a combination of:
– Social Security: $18,000–$24,000/yr (higher if delayed and/or divorced‑spouse eligible).
– Lower rent or relocation (e.g., $1,800/month brings total to ~$47,000).
– Part‑time income of $10,000–$15,000/yr for a few years, which also lets you delay Social Security for a larger benefit.
How to proceed
– Before filing
1) Inventory everything: account statements, tax returns, pensions, Social Security estimates for both spouses, insurance, debts.
2) Get independent projections: Work with a fee‑only CFP and a CDFA (Certified Divorce Financial Analyst) to model post‑divorce budgets and withdrawal plans under multiple housing and Social Security scenarios.
3) Check the 10‑year rule: If you’re near a 10‑year marriage mark, consider timing.
4) Price your new life: Get real quotes for rent in target areas, ACA premiums and subsidies at various income levels, and—if buying—a total cost of ownership estimate.
5) Choose the process: Mediation or collaborative divorce often preserves more assets than litigation.
– After settlement
1) Execute QDROs and transfers correctly to avoid taxes.
2) Build a 10‑year funding glidepath: cash/T‑bills, TIPS ladder, diversified equity sleeve.
3) Set a spending guardrail: For example, a 3.3% initial withdrawal with “guardrails” to adjust up or down based on portfolio performance.
4) Revisit annually: Adjust for rent changes, healthcare, and markets; reassess Social Security start date each year until you claim.
Bottom line
– If you truly retain around $1.5 million and can keep annual spending near $55,000 or less until Social Security starts, you can likely afford to divorce with a comfortable margin.
– If your share is closer to $750,000, it’s still feasible if you keep rent modest, are thoughtful about ACA subsidies, and either delay Social Security or supplement with part‑time income—especially in the first 5–8 years.
– The decisive levers are housing cost, Social Security timing, and keeping withdrawals near 3%–3.5%. Get professional, scenario‑based planning before finalizing the divorce so the settlement matches the life you want to fund.
