American News Group

A Divorce Could Have a Big Impact on Your Retirement Savings

Divorce can affect your life in many ways. Unfortunately, one big way it could have an impact is by making it harder to retire.

Divorce can affect your retirement security because the process itself can be costly and you may drain your savings to pay for legal support. If you lose a portion of your retirement savings to your spouse or your household income goes down after divorce and you find it difficult to continue saving, that could also reduce the size of your nest egg.

But just how much can ending a marriage affect your later years? Data from the National Institute for Retirement Security (NIRS) reveals that the consequences can be dire if you don’t act.

Here’s the impact of divorce on your retirement account balance

According to NIRS, divorced people have less money in their individual retirement accounts than the married do. While the mean value of independently owned defined contribution accounts is $84,874 for married men and $50,126 for married women, those numbers drop to $58,951 for a divorced man and $38,613 for a divorced woman. 

Married people also, unsurprisingly, have more retirement money for their households. For example, the mean value of household defined contribution accounts is $136,055 for married men, while it’s the same $58,951 for the divorced. 

With such a discrepancy between the size of the average account balance, it’s probably no surprise that NIRS showed the elderly poor are more likely to be divorced than married elderly Americans or seniors as a whole.  

The news gets worse for women, as those who divorce tend to do worse than men in terms of their retirement savings. However, women who divorce early in life aren’t hit as hard as those who end a marriage later, since they have more time to bulk up their own retirement savings account balance. 

How to protect your retirement security in case of divorce

Divorce can make it more difficult to save, because household income usually falls when you become the only earner while expenses rise once you’re maintaining two separate households rather than just one. And, as mentioned, the costs of ending the marriage itself can affect wealth, as can losing some of your retirement money in the divorce.

There are, however, some steps you can take to make sure that ending your marriage doesn’t mean ending the dream of a secure retirement. Some options include:

By reworking your budget as soon as possible after divorce and making sure retirement savings is a top priority, you maximize your chances of achieving the retirement security you deserve even without help from your ex.

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