Survey Shows Divorced Women Need A Better Retirement Plan

 

One of the big financial impacts of divorce centers on retirement. Money that had been put away for a couple to share for retirement now becomes split in half for two separate individuals to sustain a lifestyle not originally built for this type of funding.

A recent survey by Fidelity Investments reveals that women much more than men know less about their actual retirement funds and plan less for it – even though they worry as much as, if not more than, men about having enough money for retirement.
Some of the findings of the survey:

“Although 72% of couples surveyed said they communicate exceptionally or very well about financial matters, 60% of the respondents disagreed on what their Social Security payments would be in retirement, and more than 40% couldn’t even correctly identify how much their partner earns!”

 

“More than half of respondents (51%) reported worrying about outliving their savings in retirement. Despite that, 36% say they haven’t even thought about developing a retirement plan.”

These findings are disturbing, as it means more women than men are leaving themselves much more vulnerable financially in their retirement years. For example, if a woman did not work much during her marriage of 20 years, she would have only the Social Security benefits of her ex-husband and any pension or other retirement funds saved during the marriage. For couples that did not plan well for savings, the divorce leave the woman with a terrible financial situation, as it will be very difficult to live off the fixed income of Social Security. In practical terms, this means the woman will have to enter the work force in some capacity to supplement her income enough to meet basic needs – and this could be true even for women who have enjoyed a nice lifestyle because of the role retirement savings plays in later life.

What can women do to avoid this situation?

First, become much better informed about all marital earnings and what sums go to retirement accounts and how those accounts work. Consult with your financial planner and be part of the decision making team. Ask key questions about what would happen if you divorced and what level of savings you would need to live a given lifestyle.

Second, consider taking a job specifically to put money away into a retirement fund. In the event of divorce, even though these funds are classified as marital, the woman could have a claim to a greater share because of the source of funds.

Third, consider a postnuptial agreement that would set aside a certain amount of retirement funds for you to assure that you would have an acceptable standard of living, even if that means that the former spouse would agree to make continued contributions to the retirement fund after divorce in lieu of maintenance.

Financial planning for retirement is so critical in relation to divorce, and all married couples should consult with both financial advisers and attorneys to see how to best protect themselves in the event of divorce.

If you have questions about financial planning, retirement and divorce, contact us – we can help.