Fifty-six percent of married Americans in a recent survey said that a divorce would disrupt their financial strategy for retirement, according to Allianz Life.
But even as the national divorce rate has edged downward, the rate among those 65 and older is increasing, a phenomenon often referred to as “gray divorce.” Divorcing near or after retirement presents distinct challenges, Allianz Life said, especially if a couple created a retirement strategy together.
The survey found that 56% of married participants said that a divorce would derail their financial strategy for retirement, including 63% of millennials and 52% of Gen Xers, but only 35% of baby boomers.
Two-thirds of Hispanic respondents worried about the effects of a future divorce on their retirement planning, as did 56% of white, 49% of Asian/Asian American and 47% of Black/African American respondents.
“No one wants to prepare for a divorce,” Kelly LaVigne, vice president of consumer insights at Allianz Life, said in a statement. “But divorce later in life — especially after retiring — is increasingly common. If you have been planning for retirement as a couple, then splitting up your assets to fund separate retirements can leave you short of achieving your retirement goals.”
Allianz Center for the Future of Retirement conducted an online survey in January and February among a nationally representative sample of 1,000 respondents 25 and older in the contiguous United States with an annual household income of at least $50,000 for singles and $75,000 for those married or partnered, or investable assets of $150,000 or more.
The study also included an additional sample of 400 respondents who identified as Black/African American, 404 as Hispanic, 364 as Asian/Asian American and 166 as divorced.
Divorce Increases Financial Stress
Forty percent of survey respondents who have gone through divorce said that it had derailed their financial strategy for retirement, and 34% said that doing so set back their retirement plans. Still, 44% of divorced Americans said that getting divorced prompted them to put more thought into their retirement plan.
“It may sound cold-hearted, but it’s important to consider how a divorce would affect your financial future,” LaVigne said. “Those going through ‘gray divorce’ don’t have the time to rebuild retirement savings on their own. Trying to fund two separate lives, instead of a joint one, can deplete retirement accounts faster than anticipated.”
They may need to stay on the job longer to accumulate more savings, he said, and consider additional risk management strategies to ensure that their funds can last for the duration of their retirement.
The survey found that 35% of married respondents worry about not having a financial plan if they get divorced, younger ones more than their older peers. Forty-seven percent of millennials said they worry about not having a financial plan for a potential future divorce, compared with 37% of Gen Xers and 15% of boomers.
This worry is not trivial, Allianz Life said. Fifty-four percent of divorced Americans reported that they have substantially more financial responsibilities following their divorce. Forty-one percent said that they feel more stressed about their finances since their divorce.
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