Archive for October, 2016

Divorce Is Destroying Retirement

As Baby Boomers reach adulthood, divorce in the U.S. has increased. When they enter retirement, it tends to have an effect on the couple and a disproportionately negative effect on women.

According to a Bowling Green State University’s National Center for Family & Marriage Research study, divorce rates for younger Americans have fallen, but failed marriages among those over age 50 have doubled. The overall divorce rate in the U.S. has remained constant — about 50% of all marriages will collapse.

It appears that part of the reason why about one in five Americans over age 65 are still working is because of divorce. Unlike divorces earlier in life, later breakups have a huge impact on finances and often force people to delay retirement.

Research suggests this monetary stress also plays an outsize role in pushing older women back into the workforce. This can be a huge challenge for a woman that was a “stay-at-home mother” and hasn’t been in the workforce for many years.

According to studies at Boston College and at Mathematica Policy Research, the later a woman gets divorced, the more likely she will be working full time late in life. In the study of almost 56,000 women, they found that women who divorced in their 50s were about 10% more likely to be working full time from ages 50 to 74.

Women born in the early 1950s are 19% more likely to be working full-time after age 50 compared with women born in the 1920s. They calculate that 11% of this difference is because of changes in marital status.

The financial issues of divorce are also much greater than just the legal fees and court costs. It means splitting assets, and many costs are suddenly double. There are two homes to maintain, two sets of bills, and so forth.

When women with children divorce, they often trade retirement assets to hold onto the family home. From our experience, this can be a big mistake. Even if they can afford the costs of maintaining the home, these women can end up depleting their retirement savings. This also requires them to keep working to maintain the home.

As a result, divorced people are more likely to be poor in their 60s, 70s, and beyond. Research from the National Center for Family & Marriage Research shows that the poverty rate tends to be low for married Americans over age 62 who never divorced. Just 3.4% of this group are considered “poor.” However, 16% of single people who were divorced before age 50 are poor, and 19% of single people divorced after age 50 are poor.

One reason for this difference is Social Security. Married people who were never divorced get an average of $22,607 per year. Single people who divorced after age 50 qualify for an average of $12,092. Some women may get less than men since they were out of the workforce, raising the children.

Another study showed that the poverty rate for women is after a late-in-life divorce. The rate for single men divorced after age 50 is 11.4%, while women were at almost 27% when they divorced after age 50.

One way to avoid these economic circumstances can be to remarry. For those that get divorced after age 50 and then remarry, the poverty rate is just 3.3%. However, second and third marriages have a higher rate of divorce than first marriages. So for those who remarry there is a higher risk of ending up getting divorced all over again at an even older age.

 

Armand and Robbin D’Alo