The Divorce Gap: Unique Retirement Issues for Women Over 50
The shocking loss of income and retirement savings that disproportionately affect divorced women is a big challenge – especially for those over 50.
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Going through a divorce is difficult for everyone involved — but the economic consequences almost always fall more heavily on the woman. According to research by the Government Accountability Office (opens in new tab), women over 50 who divorce will see their income drop by an average of 41%, versus only 23% for men.
In addition, these women have fewer years until retirement and fewer opportunities to recover financially than younger women. And while the divorce rate for young couples has declined, it has doubled among couples over 50 since the 1990s, reports the Pew Research Center (opens in new tab).
A Staggering Loss for Divorced Women
A typical woman suffers a 73% drop in her standard of living post-divorce. However, her ex-husband enjoys an on-average 42% improved standard of living, according to Lenore Weitzman, a George Mason University sociology and law professor.
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"Women are more likely to feel divorce's financial burden,” says Shweta Lawande (opens in new tab), CFP ®, CDFA® and lead adviser with Francis Financial, a firm specializing in divorce financial planning. “A woman can pretty much see her retirement savings in IRAs, 401(k)s, pension plans, 457s and 403(b) plans cut in half, which can be devastating. In addition, she is unable to recover because she tends to earn less in her career and may have also taken time out of the workforce to care for children."
The divorce gap also creates inequalities between married and divorced women. For example, the Retirement Confidence Survey (opens in new tab) released in March 2020 revealed that 76% of married women voiced being very or somewhat confident they will have enough money to live comfortably throughout their retirement years. Yet only 43% of divorced women feel the same. But, of course, since that time, pandemic-related stock-market volatility has most likely caused divorced women to feel even more financially vulnerable, along with most Americans.
Unfortunate Gaps in Knowledge
While divorced women workers stand out in the survey as having the lowest retirement confidence, they also lack knowledge about what they need for a financially secure future. For example, fewer than half of the divorced women were very or somewhat confident in knowing how much money they needed to save by retirement to live comfortably in their golden years. So not only do divorced women fret about having enough savings for their golden years, they are also struggling with even knowing how much they will need.
To help close the gap, Lawande suggests that women become more educated about their financial situation and work with a Certified Divorce Financial Analyst™ to understand better how they need to plan for retirement and even everyday money issues. She also recommends that they hire a lawyer who is well versed in their state's laws to ensure that they have a financially advantageous settlement agreement.
Matrimonial attorney Lisa Zeiderman of Miller Zeiderman LLP says women typically feel the financial repercussions of divorce more intensely than men. "Getting a divorce will absolutely impact how much money you will have for retirement. Divorce and the loss of retirement assets can hit you hard. This is especially true if you haven't hired a lawyer who will advocate for you and if you have not taken steps to protect you and your financial future."
The Gap in Wages and Savings Creates an Uphill Battle
Don't look to income from an employer to make up the gap. Women earn about 20% less than their male counterparts, also resulting in smaller pensions and fewer dollars saved into company 401(k)s and other retirement accounts. Women are blessed with longer life spans, but this can also wreak havoc, financially, for a divorced woman in her 50s, 60s and 70s. She faces an uphill battle against time to create enough assets to last the rest of her long life.
Divorcing later in life is much different than in your 20s, 30s and even 40s, when you still have plenty of time to rebuild your assets, reduce your spending and increase your income.
The Solution for Divorcing Women
According to Zeiderman, who in addition to her law degree is also a Certified Divorce Financial Analyst™, "There is no room for error at this stage of your life. Mistakes can be costly, and most women over age 50 do not have the time to recover. Therefore, hiring the right divorce team that includes a seasoned divorce lawyer and divorce financial expert is critical.”
Lawande chimes in, "The women who fare best post-divorce are those who not only have the right divorce team but have also 'leaned into' the finances. They work with their expert divorce advisers to better understand the implications of the property division, Social Security and pension payout options, spousal support payments, and health insurance coverage."
Final Thoughts for Women Headed for Divorce
Divorce is not easy, but you do not have to do it on your own. The divorce industry has stepped up to the plate with numerous legal, financial and emotional support structures to help empower those moving from coupledom to single life with the right legal advice and financial security.
Be sure to reach out to a divorce attorney who is highly recommended in your state as well as a Certified Divorce Financial Analyst™ to ensure that you understand all the legal and financial issues of your divorce.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC (opens in new tab) or with FINRA (opens in new tab).
Stacy is a nationally recognized financial expert and the President and CEO of Francis Financial Inc. (opens in new tab), which she founded 15 years ago. She is a Certified Financial Planner® (CFP®) and Certified Divorce Financial Analyst® (CDFA®) who provides advice to women going through transitions, such as divorce, widowhood and sudden wealth. She is also the founder of Savvy Ladies™, a nonprofit that has provided free personal finance education and resources to over 15,000 women.
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