Study: Gray divorce can be especially financially harmful for women

Research suggests gray divorce can put women at enhanced risk for poverty, which makes thoughtful financial planning critical during this process.

As gray divorce has become more common, it has also gained a reputation for presenting unique financial challenges. Many spouses completing gray divorces in Denver have limited working years left or fewer vocational opportunities than they did earlier in life. As a result, even when separate and marital property are divided equitably and alimony is awarded fairly, these spouses may still face financial strife. Unfortunately, a new study suggests that the harmful financial impacts of gray divorce may be especially pronounced for women.

Alarming economic costs

The study, which was conducted by researchers at Ohio’s Bowling Green State University, compared the economic well-being of 9,649 people over the age of 63. After assessing each person’s income and available Social Security benefits, the researchers found that women who had completed gray divorces suffered from significant financial disadvantages. Women in this group had a poverty rate of 27 percent, which was more than twice that of their male peers.

The researchers expect that this issue could become more pronounced in coming years. After a gray divorce, women who were married for over 10 years may qualify to collect Social Security benefits based on an ex-spouse’s earnings record. Over the next several years, researchers project that the number of women who are eligible to receive these benefits will fall. This could result in even higher poverty rates among women who divorce later in life.

Minimizing financial losses

The risk of poverty after gray divorce makes it essential for people completing these divorces to employ careful financial planning. USA Today recommends that spouses take the following steps to protect their financial interests:

• Recognize that retiring alone will cost more. By some estimates, two individual retirements cost up to 50 percent more than a shared retirement. Therefore, even spouses who were on track to retire together may fall short financially after a gray divorce.
• Develop a plan for addressing this shortfall. Many spouses may need to consider reentering the workforce, delaying retirement, planning a more frugal retirement or using some combination of these approaches.
• Make strategic legal decisions. It’s crucial that spouses avoid unnecessary disputes, as these can increase legal costs. At the same time, spouses should be careful to pursue any property or assistance that they are legally entitled to, including alimony or spousal support.

U.S. News also advises divorcing spouses to give careful consideration to the assets that they will seek during the divorce settlement. As an example, some spouses may feel highly reluctant to give up their marital home. However, to secure this asset when property is divided, spouses may have to give up other assets, such as retirement benefits. Doing so may put spouses at risk for financial shortages later.

Avoiding costly missteps

To reduce the risk of oversights or ill-advised legal decisions, anyone preparing for a gray divorce in Colorado should consider discussing the situation with a divorce attorney. An attorney may be able to help a person develop a tailored strategy for protecting his or her financial interests during and after a divorce.