When it comes to retirement readiness, women are at a significant disadvantage compared to men. Retirement income for women is only 80% of men in the same age group. Retired women are more dependent on Social Security (making up 52% of their income vs. 48% for men). Women have a greater life expectancy (80.5 years for females vs. 75.1 for males, according to the CDC’s 2020 statistics), which means they live longer on less money. Women 65 and over are considerably more likely to live in poverty than their male counterparts, which is higher among divorced women.
According to a 2020 report from the Employee Benefit Research Institute,
“Divorced women face an uphill battle in having a financially comfortable retirement — this was a finding from the 30th annual Retirement Confidence Survey (RCS). Indeed, in the EBRI Issue Brief “Retirement Confidence Survey: Attitudes Toward Retirement by Women of Different Marital Statuses,” divorced women particularly stood out as having low levels of assets, retirement preparations, and retirement confidence.”
To understand the specific risks divorced women face in retirement, we have to consider the numerous individual and societal factors contributing to these sobering statistics.
Women, in general, tend to have lower earnings over a lifetime, and there are several reasons for this. First, there’s the gender pay gap. Yes, in 2022, women still do the same jobs as men for less money—nearly 20% less, about 82 cents on the dollar. It’s noteworthy that this is the same disparity that appears in retirement.
Next, there’s the reality that many women reduce work or leave the labor force altogether for a significant period because they’re raising children. Not only does this mean that by retirement time, they have fewer total years of employment, but they frequently earn less when they return to their careers after a lengthy gap.
Child-rearing isn’t the only caregiving responsibility that women often bear. Studies show that women are more likely to bounce back financially after staying home with children than from other types of caregiving duties, such as for a spouse or aging parents, which can be even more detrimental to retirement prospects.
Divorce adds several layers of complexity to this already challenging outlook.
- According to a 2017 report from the U.S. Government Accountability Office, after a divorce, household income drops 41% for women, almost double the drop that men experience.
- Division of assets can be complicated.
- The cost of living is higher for a single person.
- Divorced women are often custodial parents, juggling both work and childcare.
- Timing matters. Today, more and more couples are splitting after 50. A midlife divorce can be devastating to retirement preparedness—even if you’re returning to work, your earnings may be down; you have less time to pay off debts, make up for losses, and ride out changes in the market.
Proactive financial involvement is crucial. Here are three key steps women can take to prepare for retirement while going through a divorce:
Assemble your team. Although it’s an extra expense, depending on the circumstance of your divorce, in addition to an experienced lawyer, it may be wise to hire a financial advisor or Certified Divorce Financial Analyst (CFDA). Along with your attorney, a CDFA can help you reach an equitable settlement. They help value assets (including your shared home) and assess debt; they advise on alimony, the division of pensions and retirement funds, crucial tax implications of your divorce agreement, Social Security, and more. Remember that community property laws mean that you don’t just divide assets; you share debts as well. A professional can help ensure that you know what you owe as well as what you have and assist in actively planning and budgeting for post-divorce life over the short- and long-term.
Don’t forget the details. Make sure you have made necessary updates to things like asset titles, account beneficiaries, and insurance coverage; cancel joint accounts.
Take an honest look at your budget and expenses. Consider your current lifestyle—and the one you want to have in your retirement. Although it can be difficult, especially with children, there may be areas where you should cut back now to fortify your future. For example, it could be advantageous to sell the house and downsize.
If your split has you concerned about retirement and your financial future, choosing the right family law firm can enormously impact the outcome of your case. The family law attorneys at SFLG are experienced in navigating the complexities of divorce at any stage of life. Our firm’s commitment to professionalism, civility, and open and honest communication allows us to provide our clients with the highest level of professional service.
By Debra Schoenberg
