The Bills

Think Divorce Is Miserable?

Look how bad life can get when divorcees try to retire. Especially when they’re women.

divorce retirement.
Women—married or unmarried—have a harder time building up retirement savings than men.


Once upon a time, Monique Prince didn’t worry much about planning for retirement.  True, the southern New Hampshire resident was a stay-at-home mom with three small children. But her husband earned six figures at a corporate job, and he had saved six figures in his 401(k) and individual retirement account.

Then the divorce happened. Prince says her ex-husband got almost all the retirement money. She got the family’s home—which she ultimately had to sell to pay her legal bills. What retirement money she had she ultimately cashed out to “pay off debt and buy groceries,” she told me recently.

Today, Prince, 49, is a clinical social worker—for which she had to return to school, using student loans to fund part of it. Frantic to make up for her losses, she puts $150 a month into her workplace retirement plan. It’s more than she can comfortably afford some months, she says. It’s also nowhere near enough. Her account balance is $5,000.

“Yes, I can work till I’m 70, but that’s only 20 years to try to save up enough money to support myself,” Prince says. “It’s not enough time to get enough money for retirement.”

There’s plenty of blame to go around for the fact that an increasing number of Americans are at risk of running out of money in retirement. Most important is the gradual but seismic switch from workplace pensions to defined-contribution schemes like the 401(k), which put the onus and risk of saving and investing on employees. Age discrimination almost certainly plays a role—people in their 50s who lose their jobs are unemployed for longer periods of time and are often offered jobs paying significantly less than their previous salaries. You can even point to increasing medical costs, which Fidelity Investments says will cost a couple who retired at the age of 65 last year an estimated $245,000, up from a not-exactly measly $190,000 a decade earlier.

One culprit that rarely comes up is divorce. It’s an uncomfortable subject. Mentioning it feels like blaming the victim, though of course no one gets married intending to get divorced. And divorce may actually be less socially accepted than it was a decade ago. Vox recently crunched data from the federal government’s National Survey of Family Growth and documented a significant falloff in the number of people who agreed that “divorce is usually the best solution when a couple can’t seem to work out their marriage problems.” The numbers all but crashed among women with college degrees—in 2002, 42 percent said yes to divorce in those circumstances, and just 31 percent did a decade later.

Yet the impact of divorce on personal net worth is so openly acknowledged in financial planning circles that I once attended a women-and-money talk sponsored by Citibank and witnessed a roomful of mostly middle-aged and older people burst into knowing laughter when personal finance columnist Jonathan Clements joked, “It’s important not to get divorced. Trust me. You can lose half your wealth.”

No one had to ask what Clements was talking about. Divorce impacts both sexes in retirement, but it hits women especially hard. “[It] affects retirement income for both parties, but usually less for men as they earn more,” says Cindy Hounsell, the president of the Women’s Institute for a Secure Retirement. “All retirement risks end up hurting women more.” According to a 2014 report by the General Accounting Office, 4 percent of married men and 5 percent of married women over the age of 65 live in poverty. On the other hand, almost 11 percent of divorced men and 18 percent of divorced women have incomes that put them under the poverty line. That’s more than those who find themselves in financial trouble thanks to widowhood. Only the never-married have it worse.

Researchers have tracked similar effects in a number of countries, including Canada (“The separated and divorced are the poorest of all older unattached women in Canada”) and the United Kingdom, where last year Prudential determined that people who divorced could expect a retirement income that was 2,100 pounds (a little bit more than $3,000) less annually than their still-married peers.

The reasons why divorced women lose out far more than men, alas, won’t shock you. Women—married or unmarried—have a harder time building up retirement savings than men. They have less money in workplace retirement plans, thanks to everything from lower salaries, spottier work histories, and a tendency to invest less aggressively than men. The result: Women’s incomes in retirement are on average, according to the Women’s Institute for a Secure Retirement, more than $10,000 less than men’s.

These same factors, of course, impact women’s postdivorce finances. People who scaled back on their careers to take care of family members can’t simply ramp back up because they suddenly need the money. An AARP survey from 2009 discovered three-quarters of women they asked agreed divorce had forced them to cut back their spending, while a smaller majority of men—59 percent—said the same thing. 

Marriage also offers unique economic protections to both sexes. People who divorce lose the economies of scale that married men and women can benefit from. Suddenly there are two rents or mortgages to pay, two homes to furnish, two Christmas trees to purchase, two Thanksgiving dinners to host. Moreover, the divorce itself can be costly—almost everyone who has looked at the issue says the legal bills themselves often cost between $15,000 and $30,000.

No surprise that divorce almost certainly leaves permanent economic scars on almost everyone who goes through it, male or female. Research by Julie Zissimopoulos, then a researcher for the Rand Corporation (she’s now as assistant professor of public policy as the University of Southern California), found that couples who remarry will have higher incomes but lower net worth compared with their peers who remained with their one and only spouse. “This suggests that there may be a wealth loss associated with divorce that may be difficult to recoup,” she said in a 2010 interview.

This ties in with a paper published by Jay Zagorsky, a researcher with Ohio State University’s Center for Human Resource Research in the Journal of Sociology back in 2005. Using data from the National Longitudinal Study of Youth, he found the net worth of younger baby boomer couples who would go on to separate and divorce began to plummet four years prior to the official end to their marriages, ultimately costing them a majority of their overall savings. His gallows-humor take on the finding? “Divorce looks like one of the fastest ways to destroy your wealth.”

Both Zissimopoulos and Zagorsky found the impacts of divorce were worse on women than men. Zagorsky discovered that even as both sexes suffered from divorce-related wealth loss, women lost more money than men. And Zissimopoulos reported that even after the legal end of marriages, wealth increased at slower rates for divorced women than for divorced men.

Compounding the worries of retirement researchers: So-called gray divorce is on the rise. According to research performed by Susan Brown, a professor of sociology at Bowling Green State University, the number of divorces for people over the age of 50 doubled between 1990 and 2010. “The financial implications are potentially troubling,” Brown says. “The evidence we have says gray-divorce women are at a particular disadvantage.”

No kidding. Brown has found that more than a quarter of gray-divorce women live in poverty in retirement, compared with 11 percent of gray-divorce men.

One reason this is worth talking about is that unhappy couples are quicker to divorce than in the past. According to research performed by Rose Kreider and Renee Ellis and released by the Census Bureau in 2011, 82.8 percent of women who got married between 1960 and 1964 were still legally bound together a decade later; the number had dropped to 74.5 percent between 1990 and 1994.

The 10-year marker is significant because Social Security allows both men and women to take benefits calculated based on their former spouse’s earnings, something that often benefits the lower-earning partner, who otherwise would receive a smaller check based on his or her lesser salary history. But—and this is a big but—only people married at least 10 years can collect in this way.

So what to do? Experts are quick to say that both men and women need to be conscious of retirement benefits in divorce settlements. Jim Uren, an Illinois-based certified financial planner, says he reminds clients to consider the future value of the asset, not just the present value, when deciding how to split marital assets. Retirement accounts, which grow tax-free, are often more valuable in the long run, he says, but courts—and people—are mostly interested in the here and now: “The way I explain it to clients is that the court treats both a hen and rooster as chickens. In reality, that hen will be laying eggs and be more beneficial in the long run than the rooster.”

Yet society shouldn’t be content to let individuals bear this problem alone. Divorce often happens for a good reason. People don’t form legal unions frivolously, and they don’t deserve to live in severe financial straits as a penalty for marrying the wrong person. And dissolving those unions often involves braving a minefield of misinformation. Hounsell told me her organization frequently hears from women who’ve been told they can only access Social Security via their former spouse’s work history, so they end up surrendering something else in the financial negotiations. “We explain that the law allows that benefit, not the largess of their soon-to-be ex-spouse,” she says.

There are some legislative efforts in the works, although like anything in Washington right now, they aren’t going anywhere particularly fast. Democratic Sen. Patty Murray of Washington introduced a bill last year that would allow people who have been married between five and 10 years to use their former spouse’s earnings on a phased-in basis to calculate their Social Security benefits. Also last year, Murray teamed up with Democratic Rep. Jan Schakowsky of Illinois to push a bill called the Women’s Pension Protection Act, which would change the law so that if a spouse wanted to remove money from his or her defined contribution plan, he or she would need the permission of his or her husband or wife. This would prevent one spouse from withdrawing or spending the money without the knowledge of the other, which is something that happens more often than it should, divorce or no divorce.

But for every step forward, there’s one step back. The Florida legislature recently passed a bill reforming alimony awards and payments in the state. Among the changes: Lifetime alimony would end. In addition, it will be easier for spouses paying former partners to cease doing so when they retire. If you’re wondering, women receive 96 percent of all alimony awards, according to the Census Bureau. Not surprisingly, many women’s advocates are crying foul. It’s unclear whether Florida Gov. Rick Scott will sign the legislation.