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Thursday, March 28, 2024

Divorce can devastate women’s retirement savings. Here’s how to rebuild

Many people don't think their marriage will end in divorce. However, splitting up can significantly set retirement savings back, especially for women.

Divorced or separated women over the age of 65 had a median household income of $35,736 in 2016, trailing men in the same category who made nearly $38,000 annually, according to data from the Center for Retirement Research at Boston College. That lags married men and women over the age of 65, who in the same year had median household incomes of $67,404 and $64,524, respectively.

Women and men who had been widowed or never married also had less money to live on than their married counterparts, and women trailed men in every category.

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One major reason for this is the wage gap between men and women, according to Geoffrey Sanzenbacher, an associate professor of the practice of economics at Boston College and a fellow at the Center for Retirement Research. Women often take time away from work to raise children or care for other family members, which can mean they make less over time.

"That effects them forever, basically," he said. In addition, divorced women are more likely to have children.

Of course, divorce also impacts men's finances, but usually less so than for women. Here's how women can start to rebuild their retirement savings after a divorce, according to experts.

Take stock of finances

During a divorce, assets accumulated during the marriage will be separated.

Following this process, it's important to women sure that appropriate changes have been made, such as canceling joint accounts, retitling assets in their name, updating account beneficiaries, reviewing insurance coverage and updating estate plans.

Then, women should look at their budget and rethink their current and future lifestyle, according to Linda Farinola, certified financial planner and president of PFG-Financial Planning and Management in Princeton, New Jersey. If they don't have enough to make ends meet and save for the retirement they want, they may need to make cuts now, such as selling a larger house to buy a smaller one.

While changing your budget might be painful, especially if you have children, it will help you in the long-term if you're able to save more, Farinola said.

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