Why gray divorce poses a significant financial risk for women

Breaking up in old age can be costly, especially for women.

The rate of “gray divorces”—a term that refers to divorces among people aged 50 or older—doubled from 1990 to 2019, according to the study. 2022 study published in The Journals of Gerontology. For adults over 65, the rate tripled.

In 1970, about 8% of divorced Americans were age 50 or older. The study found that by 2019, this proportion had jumped to an “astonishing” 36%.

About 1 in 10 people (9%) who divorced in 2019 were over 65.

Meanwhile, divorce rates among young adults have fallen, according to Susan Brown and Ai-Feng Lin, sociology professors at Bowling Green State University who compiled the analysis.

In heterosexual relationships, a gray divorce typically “has more negative consequences for women than for men,” says Camila Elliott, a certified financial planner and co-founder of Atlanta-based Collective Wealth Partners.

Research suggest Women’s household income typically falls 23–40% in the year following divorce.

The economic impact is “less severe” for men, with some studies suggesting their income may even increase after a breakup, according to Laura Tah and Alicia Eads, sociology professors at Cornell University and the University of Toronto, respectively. The duo is co-author of several documentation on this topic.

These financial differences appear to be less noticeable for younger generations of women due to their greater likelihood of working compared to older generations, experts say. According to them, many older people who get divorced today adhere to the traditional idea of ​​a man as the sole breadwinner in the family.

“Today we see women in divorce who are part of a generation that simply hasn’t worked their entire lives,” said Natalie Colley, a New York-based CFP and senior lead advisor at Francisco Financial.

Women also tend to earn lower incomes than men due to persistent wage gaps; they tend to have less savings, and divorcing near-retirees don’t have much time to make up the difference. Divorced women can qualify for Social Security benefits based on their own earnings or their ex-spouse’s earnings history, but the latter option typically amounts to only half of the ex-spouse’s benefit.

Remarriage or cohabitation usually helps strengthen one’s finances by pooling resources. But women who experience a gray divorce do so less often than men: Only 22% of women re-partner within a decade of a gray divorce, compared with 37% of men, putting them at a “sustained economic disadvantage into old age,” according to data separate paper Brown and Lin.

Overall, women’s living standards fell by 45% after a bad divorce, while men’s fell by 21%, Brown and Lin wrote.

These negative economic effects persisted over time, “indicating that gray divorce represents a chronic economic strain,” they said.

Brown and Lin found that the poverty rate among women old enough to qualify for Social Security retirement benefits was nearly twice as high for women who divorced after age 50 than for those who divorced before age 50; the same does not apply to men.

Here are a few steps women can take to protect themselves from the financial pitfalls associated with a potential future divorce, according to financial advisors.

Be proactive in your family finances. “Women need to play a very active role in family finances,” said Elliott, a member of the CNBC Advisory Council.

Women shouldn’t get to the point where they don’t know about expenses, their family’s savings, mortgage payments and interest rates, she said. This information may come as a surprise after a divorce, and women may learn that they are not financially secure enough.

Additionally, not being involved in financial decisions could mean they are ill-prepared to manage their finances if they become single, Colley said.

“I can’t tell you how many times I’ve met couples where the woman had no idea what the husband was doing financially,” Elliott said.

Have access to your money. Many couples combine their financial accounts. Many women may also be authorized users of credit cards rather than primary cardholders, Elliott said.

But women need to ensure they have access to their own funds so their spouse can’t turn off the financial tap if the relationship turns sour, Elliott says.

Additionally, women should consider investing or saving in their retirement accounts, she added.

Retirement savers typically need earned income to open and contribute to an individual retirement account; however, non-working women can open “spousal IRA” depending on your spouse’s income. (To open it, you must be married and file a joint tax return.)

Be strategic when applying for Social Security. Social Security is an important source of income security in retirement, especially for women.

Sequencing benefits claims can be important for married couples and can help women insure against divorce (or widowhood) in the future, Colley said.

For example, suppose a husband is entitled to more Social Security benefits than his female spouse. He can delay claiming benefits until age 70, thereby maximizing his lifetime monthly benefit.

According to Colley, this increases the monthly benefit his wife would receive in the event of divorce or widowhood and helps maximize the woman’s cash flow in such circumstances.

Save some child support. If a woman receives alimony after a divorce, she should aim to save some of it rather than spend it all, Elliott says. That’s because child support is usually only paid for a certain period of time, and women must renew it, she said.

“The fact that you receive child support is not common” compared to the level of expenses, she said. “You probably need to reconsider your lifestyle.”

Consider a prenuptial or postnuptial agreement. Couples may also consider marriage contract or postnuptial agreement It contains provisions to protect a woman financially if she leaves her job, for example, to care for her children, Colley said.

This typically permanently reduces the caregiver’s earning potential, and a legal agreement can help protect against this financial risk, she said. For example, it might provide that a woman would receive a guaranteed stream of income for a certain number of years in the event of a divorce, Colley said. She recommends working with an attorney who specializes in these types of legal documents.