It’s not fair, but it’s true: Financially healthy retirement is more difficult for women to achieve than it is for men. If you’re married, there is at least some security and comfort in being part of a team that is planning to retire together. If you are divorcing, though, you’ll be solely responsible for your own financial well-being into your later years. For you, the financial challenges posed by retirement are both multiplied and magnified.
Is retirement too daunting even to contemplate? Should you resign yourself to financial dire straits in your future, hoping someone else will take care of you? Absolutely not. Planting your head in the sand is the biggest mistake you could make.
For every obstacle you’ll face, there’s a strategy to help work through it. Here’s some of what you’re up against, and here’s how you can strategize to succeed in spite of it.
The challenge: Longevity.
The Social Security Administration reports that a man reaching age 65 today can expect to live, on average, until age 84.3. For women, that average life expectancy is 86.6. Women live longer than men; therefore, their retirements can be expected to last longer and cost more. Long life is a good thing! But, you’ll need to have more money saved to support those additional years.
Your strategy: Save as much as you can.
Think of retirement savings as a commitment. It’s not something you do with whatever money you happen to have left over at the end of the month; rather, your savings should be a high priority. Prioritize needs over wants in your spending, and make no mistake: Retirement savings fall squarely into the “need” column.
The challenge: Less income.
Women earn an average of 77 cents for every dollar earned by men. Earning less means not only do women have less money available to set aside for retirement, but also that their Social Security benefits will be significantly less than what their male counterparts will receive.
For the married woman, this is troublesome. For the divorced woman, it may be life-changing. With alimony “reform” sweeping the nation, permanent alimony which would have provided a divorced woman some financial security in her later years has been all but eliminated. Also note that if you were married less than 10 years, you won’t be able to collect Social Security benefits based on your ex-husband’s earning record.
Your strategy: Modify your lifestyle.
As painful as it can be, the reality is that divorce deals a significant financial blow – and women, unable to recoup those losses in the job market as quickly as their ex-husbands can, take the blow harder and suffer longer from it. Many divorced women simply can’t live as they used to while married.
You might need to live somewhere less expensive. You might need to put off major purchases that aren’t absolutely necessary – no more trading in your car for a new one every three years, for example. Wherever you can cut back on your current spending in favor of saving for the necessities of later life, do it.
The challenge: Lower earning potential.
Not only do most women earn less than men, but many women re-entering the job market after time away will find that they simply don’t command the income they once did. Taking time away from paid work is a no-win situation, financially. To do a stint as a stay-at-home-Mom, women sacrifice their peak earning years and career momentum. Unfortunately, many of them don’t fully realize the financial ramifications of that decision until it’s too late.
Your strategy: Work with professionals.
Re-entering the work force, you want to earn the most you possibly can. It’s worth your time to consult with a vocational expert to see where your education and skills command the highest income in the job market where you live. Don’t waste time and energy floundering around the want ads. Talk to an expert who can focus your efforts for optimum results.
The challenge: Less savings.
When you earn less, you save less. But even when women save aggressively, they are often saving for things other than their own retirements! I’ve known women to ignore planning for their futures to make sure instead that there is money for their child’s college tuition or first home. As much as you might want to give your children a financial leg up, it can do more harm than good if your own financial health is at risk.
Your strategy: Get on it early, and stay focused.
As a divorced woman, you need to begin your retirement savings as soon as possible. If you are in the settlement negotiation process, make sure your team is advocating for terms that will serve you well where retirement is concerned.
Don’t be derailed from your retirement savings. Meet your own needs first, then see what you can do toward other goals.
The challenge: Less financial literacy.
In general, women are less familiar with financial matters and report less confidence in their ability to invest than men. I think this is a problem even for happily married women, but for divorced women, lack of financial literacy is a problem with immediate and potentially severe consequences. If you left the major financial decisions to your husband during your marriage, you won’t have much know-how for investing when you’re divorced. Without that basic competence, a retirement savings strategy may seem out of reach.
Your response: Educate yourself.
Devote time and effort to learning the basics of personal financial management and investing. There’s nothing about this that can’t be learned – it’s a skill just like any other, and if you commit to getting up to speed, you will.
With a commitment to sensible retirement planning strategies, there is good reason for you to expect a financially secure retirement. On the other hand, without it, there is good cause for concern. I sincerely hope you’ll make your secure retirement a priority, and not a reason to worry.
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Reminder: As a divorced woman planning retirement, there’s no question that the cards are stacked against you. While it can be disheartening to face that reality, face it you must! If you put off thinking about it, you’re headed for serious regrets.
Hot tip: To make your divorce settlement last as long as possible and minimize your tax exposure, consult with a financial advisor. For the most appropriate guidance, find someone with expertise in the specific financial needs of divorced women.
Legal matters: The various mechanisms for retirement savings present different tax advantages and consequences. The regulations and legalese governing these things can be substantial, but fear not! Working with your financial advisor, you’ll soon be up to speed on the basics. The more your financial literacy grows, the less complicated these things will seem to you.
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Jeffrey A. Landers, CDFA™ is the author of the Think Financially, Not Emotionally® series of Amazon best-selling books, Divorce: Think Financially, Not Emotionally® – What Women Need To Know About Securing Their Financial Future Before, During, And After Divorce, Volumes I & II, DIVORCE Financial Planner For Women, Volume I and the newly released, A Woman’s Guide To Financial Security After Divorce – The Basics: Creating A Solid Foundation.
He is also the founder of Bedrock Divorce Advisors, LLC, a divorce financial advisory firm that works exclusively with women throughout the United States, and the creator of ThinkFinancially.com, a website created to educate, empower, and support women before, during, and after divorce.
Landers writes “Divorce Dollars and Sense,” a weekly blog for Forbes.com about the financial aspects of divorce for women, and he contributes articles regularly to The Huffington Post, DailyWorth, More.com, Lawyers.com, and many other publications.
