Founder and Senior Wealth Advisor of Intentional Wealth Partners and Intentional Divorce Solutions
The average cost of a divorce in the United States is between $15,000 and $20,000. High-conflict cases can exceed $100,000. With those stakes, knowing your financial priorities before settlement talks begin is essential.
While divorce rates are down, “Gray Divorce” rates are up. In fact, 36% of divorces are now in couples aged 50 or older. These are long term marriages where couples have built significant shared wealth, making the financial split more complicated. A bad divorce has deep hidden costs that can ripple through your life long after the divorce is over. It can take years to recover in some cases, long, long after the ink has dried on your divorce decree.
All too often, I see clients make mistakes that have long term consequences. The true financial devastation of a bad divorce often lies in like the thousand little things that you don’t even see coming.
Here’s 5 Expensive Divorce Mistakes People Commonly Make:
1. Not Understanding Tax Implications
Many people don’t understand the tax implications of divorce. Many of us are ready to pull our hair out during a normal tax season. But if you’re going through a divorce, it can get complicated.
Keep in mind:
- Some account values represent pre-tax values and others represent after-tax values.
- Dividing certain types of retirement accounts without a Qualified Domestic Relations Order (QDRO) can trigger additional taxes and penalties.
- Alimony and child support are not federally tax deductible for the payer, and are not taxable income for the recipient. This varies with state income taxes.
- You may be required to pay capital gains taxes on a house or stock sale.
- Just changing your tax filing status to ”single” from “married filing jointly” will result in higher tax rates and lower deduction amounts.
These are not small details. They are decisions that can cost tens of thousands of dollars. All these factors need to be considered to ensure an equitable split of assets vs. just fair market value.
2. Keeping a House They Could Barely Afford as a Couple
For many women, keeping the family home feels like the right move, especially when children are involved. Stability, familiarity, avoiding yet another upheaval. But the family home is often the single largest financial mistake after divorce that I see women make.
Here is the problem. The house comes with a mortgage, property taxes, insurance, maintenance, and utilities. All costs that were once shared. If your income cannot comfortably support all of those expenses on its own, the house becomes a financial trap, not an asset.
In addition, many women trade retirement assets for home equity during the settlement, not realizing that a dollar in a retirement account and a dollar in home equity are not worth the same thing. Retirement accounts have tax advantages and investment growth. Home equity is illiquid and fluctuates with the market.
Don’t trade away future financial security for a money trap.
3. Focusing on Short Term Comfort Instead of Long Term Goals
This brings me to my next point. Be careful what you negotiate for that will make life easier now, but will set you back in the future. For instance, many women are willing to give up valuable assets in order to secure primary custody, or to keep the house, not fully understanding the value of what they are giving up.
Going through a divorce is also a very emotional time. I’ve seen clients who comfort themselves through retail therapy, which can lead to real financial damage. I’ve also seen clients who are so fearful of spending and investing in their career or education that they’ve eliminated support that could help them build wealth in the long run.
Try to focus on your entire financial future, not just the present.
4. Not Truly Understanding the Value of a Pension
A pension earned during the marriage is marital property, which means it gets divided as part of the marital estate. But here is an important detail: only the marital portion counts. That is the value that built up while you were married. If your spouse had already been working and contributing to that pension for 10 years before you two got together, those early years are off the table.
There are also two ways to divide a pension in a divorce. The deferred distribution method splits the monthly payments when they actually come in during retirement. The immediate offset method means one spouse buys the other out using assets or cash at the time of the divorce.
Each approach has trade-offs, and the right choice depends on your full financial picture. This is exactly where getting the right advice makes a real difference.
5. Assuming You Can Always Make More Money
As a final word of warning, don’t always assume you can make more money back if you give up valuable assets in a divorce. I’ve seen clients negotiate away retirement benefits and assets to get what they want in a divorce. Many of them assume that they have another 10-15 years to earn back money to use in retirement.
This way of thinking doesn’t take into account that life is unpredictable. We just don’t know when the bottom will fall out. You never know when an accident could result in a disability, or you could unexpectedly lose your job. After 50, it’s harder to find a job and in fact 24% of those laid off after 50 never find full time employment again at the same level.
Keep your long term financial goals in mind during a divorce and don’t trade them away without considering the worst case future scenarios. Prepare for the worse and hope for the best.
About Leah Handley
Leah Hadley, AFC®, CDFA®, MAFF®, is the Founder and Senior Wealth Advisor of Intentional Wealth Partners and Intentional Divorce Solutions
Leah Hadley, AFC®, CDFA®, MAFF®, is the Founder and Senior Wealth Advisor of Intentional Wealth Partners and Intentional Divorce Solutions. With nearly 20 years of experience in financial services, she specialises in helping women navigate divorce and major life transitions with clarity and confidence. Drawing from both professional expertise and her own lived experience, Leah is known for her compassionate, judgment-free approach to financial empowerment. Her new book, Intentional Money, is a practical guide designed to help women take control of their finances and build lasting independence.
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