New Study Shows Divorce Hurts Retirement Finances but Single Women Fare Better
By: M. Scott Gordon
If you are thinking about filing for divorce in Chicago but have concerns about how dissolving your marriage will affect your retirement funds, it is important to know that divorce does often change wealth calculations for retirement. However, according to a recent study reported by CBS News, single women (who are divorced) might actually fare better than single men when it comes to having enough money to retire comfortably. Given that other studies have suggested that women have more financial difficulties than men after a divorce, what does this new study show that leads the researchers to come to a different conclusion?
Divorce Can Hurt Your Retirement Funds
As the CBS News report points out, “it’s no secret that divorce is hazardous to your wealth.” For most couples, getting divorced means that marital assets, including retirement accounts, get divided according to a theory of equitable distribution. As such, most couples end up living on fewer retirement assets while paying for individual homes and living expenses. Using one retirement fund to support two separate households can make the retirement years extremely difficult, and many seniors end up running out of money. Indeed, the possibility of running out of assets in retirement is significantly greater for those who have divorced than for those who haven’t.
How much different are a person’s finances before and after divorce? The report cites a new study conducted by the Center for Retirement Research (CRR), which indicates that net financial wealth in households that have never experienced divorce is approximately 30 percent greater than in comparable households that have. In addition, the CRR study indicates that getting divorced places a person at a 5 percent greater risk of running out of money during retirement than if she or he had not gotten divorced.
However, the CRR study also determined that single women tend to be an exception to the norm. What kind of evidence did the study cite?
Single Women and Retirement Readiness
According to the study, single women—whether they never got married or have gotten divorced—are in the same financial situation in terms of retirement readiness. Why are single women who are divorced just as prepared for retirement as women who never got married (and thus never got divorced)? The study cites real estate as the entity that tends to make a difference for single, divorced women.
In many divorce scenarios, a husband and wife dissolve their marriage and the wife retains the house in the divorce. In some cases, keeping the marital home can be a problem because newly divorced women cannot afford taxes on the property or have difficulty affording the costly upkeep on an older house. However, it turns out that, for many women, the equity in a home can be extremely beneficial. Keeping the house in a divorce frequently means that newly single divorced women have a way of “accumulating home equity,” and that home equity provides financial security during retirement years.
Seek Advice from a Chicago Divorce Attorney
If you are considering divorce and have concerns about finances in retirement, an experienced Chicago divorce attorney can help. Contact Gordon & Perlut, LLC to discuss your situation with an advocate today.