Yet the impact of divorce on personal net worth is so openly acknowledged in financial planning circles that I once attended a women-and-money talk sponsored by Citibank and witnessed a roomful of mostly middle-aged and older people burst into knowing laughter when personal finance columnist Jonathan Clements joked, “It’s important not to get divorced. Trust me. You can lose half your wealth.”
No one had to ask what Clements was talking about. Divorce impacts both sexes in retirement, but it hits women especially hard. “[It] affects retirement income for both parties, but usually less for men as they earn more,” says Cindy Hounsell, the president of the Women’s Institute for a Secure Retirement. “All retirement risks end up hurting women more.” According to a 2014 report by the General Accounting Office, 4 percent of married men and 5 percent of married women over the age of 65 live in poverty. On the other hand, almost 11 percent of divorced men and 18 percent of divorced women have incomes that put them under the poverty line. That’s more than those who find themselves in financial trouble thanks to widowhood. Only the never-married have it worse.
Researchers have tracked similar effects in a number of countries, including Canada (“The separated and divorced are the poorest of all older unattached women in Canada”) and the United Kingdom, where last year Prudentialdetermined that people who divorced could expect a retirement income that was 2,100 pounds (a little bit more than $3,000) less annually than their still-married peers.