In recent years, there has been a significant increase in the rate of “gray divorce”, with individuals aged 50 and older opting to end their marriages. According to a study published in The Journals of Gerontology, the rate of gray divorce doubled from 1990 to 2019, and even tripled for adults over the age of 65. The study found that in 1970, only about 8% of Americans who divorced were aged 50 and older, but by 2019, this number had skyrocketed to 36%.
When it comes to gray divorce, women tend to face more negative financial implications compared to men. Studies have shown that women’s household income typically drops by 23% to 40% in the year following a divorce, while men may even see an increase in their income post-divorce. This disparity is partly due to the fact that women generally earn lower incomes, have less savings, and are more likely to have spent their lives as homemakers rather than in the workforce.
According to sociology professors, Laura Tach and Alicia Eads, women’s standard of living can decline by up to 45% following a gray divorce, while men experience a less severe drop of 21%. These negative economic outcomes can persist over time, creating a chronic economic strain for individuals who have gone through a gray divorce. Poverty levels among women who divorced after the age of 50 are nearly twice as high as those who divorced before 50, highlighting the long-term financial impact of gray divorce on women.
Given the financial challenges that women face after a gray divorce, it’s crucial for them to take proactive steps to protect themselves financially. Financial advisors recommend several strategies that women can implement to safeguard their financial well-being in the event of a divorce:
1. Get involved in household finances
Women should play an active role in managing their household finances, including being aware of spending, savings, mortgage payments, and interest rates. Being engaged in financial decision-making can help women be better prepared to handle their finances independently if the need arises.
2. Secure access to personal funds
It’s important for women to have access to their own money and financial accounts to ensure financial independence. Women should consider saving and investing in their own retirement accounts, such as a spousal IRA, to build a secure financial foundation for themselves.
3. Strategically claim Social Security benefits
Social Security can be a crucial source of income in retirement, especially for women. By strategizing the timing of claiming benefits, married couples can maximize their lifetime benefits and hedge against divorce or widowhood. Planning ahead can help women secure a stable income in retirement.
4. Save alimony for the long term
If a woman receives alimony post-divorce, it’s advisable to save a portion of it for the future rather than spending it all immediately. Alimony typically has a set duration, and saving a portion of it can help women sustain their financial stability in the long run.
5. Consider legal agreements
Prenuptial or postnuptial agreements can provide financial protection for women, especially in situations where they may leave the workforce to care for children. These agreements can ensure a guaranteed income stream or financial support in the event of a divorce, helping women mitigate the financial risks associated with gray divorce.
Gray divorce can have a significant and lasting impact on the financial well-being of women. By taking proactive steps and implementing financial strategies, women can protect themselves against the economic challenges that come with divorce later in life. It is essential for women to be financially empowered and prepared to navigate the complexities of gray divorce to secure a stable financial future.