Divorce can significantly derail well-laid retirement plans, often leaving divorced baby boomers to struggle financially in retirement. Analysis shows that divorcees have lower incomes and savings than their married counterparts. Libby Mintzer envisioned retirement in a Florida gated community a decade ago, enjoying yoga and sunset views with her husband.
Today, the 73-year-old lives alone in Tampa on a monthly income of $1,600. The divorce left her without assets, including a house and shared investments, and spousal support. She even drained her savings to fund her then-husband’s business venture.
Mintzer used $200,000 to buy and furnish a one-bedroom apartment but now struggles with rising living costs. Despite trying to find part-time work, she’s maxed out her credit cards to pay for groceries. Her predicament starkly contrasts her married life when she was the primary household income earner with a six-figure salary from her 30-year career as a paralegal.
Millions of Americans are in retirement, but monthly Social Security checks aren’t enough for most baby boomers, fueling a retirement crisis. Adding to their distress is the increasing phenomenon of later-life divorces. A 2022 study found that the divorce rate for adults 65 and older nearly tripled from 1990 to 2010.
According to Census Bureau data, divorcees generally have lower average 401(k) balances, less savings, and more limited monthly retirement income than married people. For retirees like Mintzer, this leaves a precarious financial situation. “I cannot live with just Social Security,” she said.
“I don’t have any money to live on.”
Most married couples’ retirement savings are intertwined, leading to cheaper taxes and living expenses. But divorce disrupts this, often leaving each partner with significantly less.
Divorce’s impact on retiree finances
Despite the overall decline in divorce rates, the impact on retirement assets remains substantial. Married retirees tend to have over $100,000 more in their 401(k) and savings accounts than divorced retirees. Melody Evans, a vice president wealth management advisor at TIAA, suggests one way to protect assets in a divorce is through prenuptial agreements. However, they typically don’t cover the wealth accumulated during marriage.
She emphasizes the importance of couples being transparent about their finances and understanding joint assets. This division of wealth and gaps in financial literacy can have severe consequences. The average income of a married retiree is $2,577 a month, while a divorced retiree earns $1,940.
This compares to $1,887 for those who never married, $2,381 for widows, and $2,476 for those who remarried. Women are particularly vulnerable, often facing lost assets and savings due to traditional gender roles and the lingering impacts of economic disparities. Retired women’s finances tend to lag behind men’s.
Men’s monthly retirement incomes are nearly $600 higher than women’s, and they are more likely to have significant retirement account balances. Among retirees, men have an average of $318,727 saved, compared to women’s $239,706. Kathryn Clark’s story highlights this disparity.
Married young and raising her sons in California’s Bay Area, Clark worked various jobs, often as the main household earner. Post-divorce, she was left without significant assets and had to support her children on minimal income. Now 80, she lives in a low-income housing unit, relying on Social Security and struggling to afford essentials.
When her ex-husband died, she learned she could receive an extra $400 monthly from his Social Security contributions, previously surviving on less than $1,000 a month. Overall, divorced women like Clark experience lower monthly retirement incomes than men and peers who remain married. Their financial struggles underscore the profound impact divorce can have on retirement security.
Featured Image Credit: RDNE Studios; Pexels
