Since 1990, the divorce rate for people over 50 has doubled. While that may be freeing for many people who would otherwise be trapped in painful marriages, divorce over 50 has some potential downsides. One of the most crucial is the impact on your retirement savings.
A long-running study of 20,000 Americans who were born before 1960 found that a gray divorce can result in a 50% drop in your wealth. Before you panic, realize that you are splitting a single household into two, so it’s not completely unexpected that you would see a substantial drop in your net worth.
Yet the researchers, from Bowling Green State University’s National Center for Family & Marriage Research, found that, when people over 50 divorce, their actual standard of living goes down, even adjusting for household size, especially among women. The average standard of living for women over 50 plunges by 45% after divorce – about twice the decline among younger divorced women. For men over 50, the standard of living drops by an average of 21% compared to virtually no change for younger divorced men.
Bouncing back is hard
Worse, the researchers found no bounce-back in wealth during the 10 years following a divorce. This is often because people over 50 are near the peak of their earning capacity and simply may not have a chance to make up what was lost in the divorce. Or, if they have been out of the workforce for much of their adult lives, they may find it all but impossible to earn a good living upon reentry.
The most notable drawback to a divorce later in life is probably the effect it has on your retirement. Again, this was most notable among women. Another study by the same group found that, by 63, women in the U.S. who had been through a gray divorce were 27% more likely to be in poverty than their peers, even including widows.
This may simply be because you and your spouse had been saving for a shared retirement, not two single retirements. Supporting two solo individuals takes more money than supporting a couple. And, if you haven’t saved enough, you may no longer have enough time to make up the difference.
For that reason, it’s critically important to work with a divorce attorney who understands how to structure a gray divorce in order to preserve as much shared capital as possible.
These days, the U.S. divorce rate has been dropping among people 15 to 44. At the same time, divorces among Baby Boomers have been rising since the 1970s. If you are considering a divorce in mid-life, you are not alone.