The Gender Gap in Divorce: How Retirement Can Be Impacted

Divorce significantly impacts financial stability, particularly for women. Although both partners face financial challenges during and after a divorce, women often experience greater difficulties, especially regarding retirement savings and Social Security benefits.

Unequal Division of Assets

In many divorces, marital assets are divided between spouses. However, women frequently receive a smaller portion of these assets, especially if they took time off work to raise children or supported their spouse’s career. Consequently, women may have fewer resources to build their retirement savings.

Lower Lifetime Earnings

Women generally earn less over their lifetimes compared to men due to the gender pay gap and career interruptions for caregiving. Divorce can worsen this situation, as women might struggle to rebuild their careers after leaving the workforce or reducing their hours for childcare. Lower lifetime earnings result in less money available for retirement savings and reduced Social Security benefits.

Disrupted Retirement Plans

Divorce can disrupt long-term financial plans, including retirement savings strategies. Women may have to start over with their retirement savings, particularly if they received a smaller share of marital assets or used savings to cover divorce expenses. Rebuilding retirement savings later in life is challenging and may require working longer or making significant lifestyle changes.

Impact on Social Security Benefits

Social Security benefits are based on a worker’s lifetime earnings. Thus, lower lifetime earnings lead to lower Social Security benefits. Divorced individuals might be eligible for benefits based on their ex-spouse’s earnings if certain conditions are met, such as the marriage lasting at least ten years. However, if a woman’s work history is limited, she may depend heavily on these spousal benefits, which are generally lower than benefits based on her own earnings. If she remarries, she loses eligibility to claim spousal benefits on her previous husband’s work record but can claim on her new husband’s record.

Lack of Access to Retirement Plans

Women are less likely than men to have access to employer-sponsored retirement plans, such as 401(k)s, especially if they work part-time or in industries with fewer benefits. This lack of access further hampers their ability to save for retirement, making them more vulnerable in the event of a divorce.

Addressing these disparities requires policy changes, increased financial literacy, and support systems to help women achieve financial security in retirement, regardless of marital status. While we often have limited control over policy and societal systems, making wise individual decisions is crucial.

If you’re a woman planning for retirement post-divorce, contact us to schedule a consultation. We can help you identify strengths and weaknesses in your financial position and develop a long-term plan for the future.