Divorce is costly. But divorce in retirement is costly and complex. Especially if you’re a woman.
Few things savage your personal finances more than divorce. The closer you are to retirement, the worse the damage — and for women in particular — divorce is financially perilous.
Women and Retirement
When it comes to retirement planning in general, women may have to work a little harder. Why? Because women have some additional challenges to consider as they plan for their future in retirement. According to Wiser Women, the top 5 retirement challenges faced by women include:
- Women usually live longer than men but tend to save less for retirement.
- Women make 82 cents to every dollar a man earns.
- Women are more likely to work part-time jobs without access to workplace savings plans.
- Women are still the primary caregivers, often leaving jobs to care for family members.
- Older women rely on Social Security; for many it is their only source of income.
Unfortunately, things get even uglier when facing a divorce.
Divorce and Retirement
About 1% of married Americans over age 50 get divorced each year. And let’s face it… divorce is an uncomfortable subject.
Women fare so much worse in most divorce cases for many reasons: one major factor being men usually take the retirement accounts and women get the house. This results in the man receiving assets to help fund his retirement and the woman is saddled with the maintenance costs and property taxes of a house.
Secondly, women who stay home to raise children also often pay a Social Security penalty in retirement. If they didn’t work enough to qualify for benefits on their own, they receive half the Social Security benefits of their husband if married 10 years or more.
And the final blow? Many women receive employer-sponsored health coverage through their spouse’s employer, and they often lose it in divorce.
With all the odds stacked against women in retirement, what can be done to add protection when facing a divorce?
Protecting Your Assets
Along with the above set-backs, seven out of ten women will never retire and a woman’s standard of living drops 73% after divorce. But there are measures that can be taken to prevent a financial crisis.
Because many women are financially dependent on their spouse during marriage, they are the ones who suffer the most in divorce. Therefore, the best way to avoid being financially devastated after a divorce is to be financially independent while in the marriage. This can be done by eliminating debt as early in life as possible and increasing annuity income by deferring Social Security, choosing an annuity at work, and purchasing commercial annuities.
If this isn’t feasible, many women start new careers after a divorce — and are pleasantly surprised to learn how much they can actually earn.
Finally, hiring a financial advisor (specifically focused on retirement income) in divorce proceedings has invaluable benefits for women facing legal separation.
Hiring Professional Help
Using a trusted retirement income advisor will help couples looking to end a marriage work through the division of their assets to ensure an equitable settlement.
Beyond just looking at assets, a retirement income advisor will also study the individual’s cash flow and model expected future returns on investments to ensure that the ultimate settlement is fair for both parties. They can also help a person seeking a divorce to get a budget in place as they adjust to life being single once again.
At CKS Summit Group, we understand divorce can be an emotionally and financially difficult time. With our retirement income expertise, you can come out of the other side feeling stronger and less worried, with greater hope, stability and freedom in your golden years.
If you’re a woman facing divorce, contact us here today to receive the retirement planning support you need.