Researchers at Boston College’s Center for Retirement Research initiated a study into the impact that divorce had on retirement in 2018.
The study’s authors concluded that couples who divorce later in life often struggle to hold on to their retirement accounts. You may find it helpful to learn why that’s the case.
Why does divorce so significantly impact spouses as they near retirement?
Many spouses who are nearing retirement expect the funds contained in the 401(k)s or other retirement plans to cover their expenses for the rest of their lives once they leave their jobs. The potential loss of any portion of these assets as a spouse nearing retirement age cuts into what they have. Building up their nest egg again becomes a lot less realistic the nearer they happen to be to retirement, thus creating unnecessary financial strain.
The researchers working on this study analyzed data compiled as part of the National Retirement Risk Index. They discovered that at least 50% of married couples a few years out from retirement could afford the exact costs in retirement that they cover now. The researchers determined that divorce would lead to a 7% decline in these couples’ financial prospects if they divorced.
Study authors were also able to determine that financial crises, like the 2008 recession, resulted in an additional 2% reduction in a spouse’s ability to afford their expenses if they were to divorce a few years out from retirement.
The researchers discovered that some of the most crippling costs that divorcing spouses struggle with near retirement are real estate transaction ones, legal fees, alimony and child support.
How to minimize the impact your divorce has on your retirement
Divorce can be financially taxing on anyone. It’s even more likely to be if retirement is on the horizon. An attorney can advise you of some different strategies that you may be able to employ in your divorce to keep more of what you’ve worked hard to earn.