Could divorce ruin your retirement?

Divorce does not only hurt the heart, but also the wallet.

Could divorce ruin your retirement?

If you are facing divorce, retirement is probably the furthest thing on your mind, but it can cause your post-work plans to unravel quickly.

Last year, an AMP report revealed that it takes Australian divorcees at least five years to get back on their feet after a divorce.

Divorce also has serious consequences for living standards and retirement income later in life, leaving many worse off and some needing to work longer as a result of marriage breakdowns.

Even if your divorce happens decades before you retire, your retirement savings will likely take a major hit. This is because your current retirement savings are divided between you and your spouse. Also, because, at least temporarily, each household will revert to one income with the increased expense of living alone, resulting in less retirement savings than originally planned.

These factors result in divorced parents aged between 45–64 years of age having 25 per cent fewer assets than those who are still married.

What to do with the family home
If all your kids have moved out of the house when you divorce, the best option for both individuals may be to sell the family home and downsize. You may even be able to move to a cheaper suburb and put some of the equity you have built up in the property towards retirement savings. Trying to keep the family home may become too expensive for one person to maintain.

Changing your retirement plan
Once you know exactly how much retirement savings you will keep, it is time to make a new retirement plan factoring in the reduction of your existing savings and the reduction of the money you will be able to save going forward.

You will also have a new goal for how much money you will need in retirement, which should be lower than your previous goal when you were married. Consult a retirement calculator to help you calculate your new target.

Your financial life will be challenging on a single income, but with a clear goal to work towards and an expected retirement date in mind, you can see how much you will need to save. Even if you can’t make the figures work, you will be able to start small and work your way towards a time when your income catches up with your saving requirements. Once your lifestyle has recovered, you can save extra until you are back on track.

A divorce can also result in a lower income, particularly if there are children from the marriage and one of the parents has to spend more time looking after them. Sometimes in this situation you may have to reassess your retirement plans and set a more realistic goal.

The more realistic goal may mean that you have to work longer than you were expecting or settle for less in retirement, relying more heavily on the Age Pension than you may have envisaged.

Having the pension to fall back on means there is no need to panic, you will be able to get by, it is just a matter of readjusting your expectations.

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    COMMENTS

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    Eddy
    9th Feb 2018
    11:50am
    How about divorce post-retirement, that is really a financial disaster. It brings to mind a line from the old Eddie Cantor song Making Whoopee, "it's cheaper to keep her" (apologies to the feminists et al),
    Tib
    9th Feb 2018
    12:41pm
    Eddie it's not your choice to keep her, if she decides to she'll clean you out for the money. And don't apologise to feminists. ( it's embarrassing) :)))
    Rosret
    9th Feb 2018
    2:28pm
    Its not just feminists Eddy - it is absolutely a disaster for both spouses, the family inheritance and the extended family network.
    All of a sudden the network of possible carers is halved.
    If the wife or husband was a second spouse 1/2 the inheritance will go to into the abyss.
    I am with you - at this age there has to be a way to locate yourself at different ends of the houses and co exist somehow.
    Unfortunately, the lure of the young blonde bimbo is all too common and the family unit is decimated.
    Tib
    9th Feb 2018
    2:32pm
    Rosret over 70% of divorces are instigated by the women so it's unlikely to be a blonde bimbo problem.
    Rae
    9th Feb 2018
    2:48pm
    Try being widowed at 32 with three young kids and see how hard you have to work, budget and juggle. I still managed to save every fortnight. Sometimes I wonder what people spend their money on to never have enough.

    I never did remarry though. Marriage is fraught with all sorts of financial and emotional dangers.
    Tib
    9th Feb 2018
    2:48pm
    Unless of course your wife is a blonde bimbo?
    Tib
    9th Feb 2018
    2:50pm
    Good comment Rae being a widow or widower would be a hard road.
    Rae
    9th Feb 2018
    3:13pm
    Tib the one thing that saved me from poverty was having always worked and having a job at the time that brought in income. We also had a small insurance policy that covered my husband's business debts as he was a builder.

    My daughter has always worked as well. So did my mum and my mum in law. Strangely enough working mothers set a great example for their kids teaching them to share time as well as things and all got part time work when old enough while still at school.

    I simply don't believe the babies can't cope narrative.

    Of course we chose carers carefully and didn't balk at paying a reasonable amount for childcare for a few years.

    The hardest part after the initial shock was realising all the decisions were yours to wear. It was terrifying at first.

    Mending and making do and frugality never hurt any of us a bit.

    We now have successful family businesses and jobs and a wealth of experience.

    I honestly think a divorce would be harder especially having to begin all over again with a much diminished financial pot. The hurt must be awful and sense of betrayal.
    Tib
    9th Feb 2018
    3:47pm
    Yes Rae men are also unfairly treated in divorce. One of the reasons for ever reducing number of marriages. Most young men think you would have to be a fool to marry. And theyre right.
    Anonymous
    9th Feb 2018
    5:14pm
    Screw the feminists (so to speak). Not that anyone would want to.
    Rosret
    9th Feb 2018
    9:42pm
    Rae, while I totally sympathize with your plight, divorce is actually on another level again.
    As a widower you got to keep your home and assets. You didn't have to pay child support. You still would have the extended family support and your network of friends. Hopefully you had life insurance as well.
    On top of that you were permitted to grieve and society looked kindly upon your situation.
    Divorce is psychologically damaging. Not only are the ex spouses throwing verbal bullets, the people around them are also making biased judgments. Because it is so common very little credence is given to the far reaching effects of a split family.
    When a wife or husband dies no one makes makes personal judgments.
    Rae
    11th Feb 2018
    2:51am
    Yes indeed Rosret. I agree.
    Tib
    9th Feb 2018
    12:38pm
    Divorce just before retirement is very common. Women instigate it after spending their whole lives being supported by their husbands, shopping and having coffee with their friends on one long holiday.They decide oh he won't provide me with much more money and I certainly don't want him at home so I'll do my best to clean him out and that's right go back on my lifetime holiday.
    Rae
    9th Feb 2018
    2:50pm
    More fool a man for doing that Tib. Why would you support a woman for a lifetime to play houses and babies. Doesn't make sense but then I'm a woman. No way would I support a bloke to stay home surfing or playing in the shed.
    Tib
    9th Feb 2018
    3:39pm
    I agree but those sorts of relationships have been going on for generations, even expected of men. Fewer men everyday are willing to play that game anymore. Feminism is curing us of making that sort of sacrifice.
    Sundays
    9th Feb 2018
    4:50pm
    Tib, there are other types of relationships. I’m happily married. We both worked hard for common goals. First, was the six years it took us to save for our first home. Now, we are fortunate to have a comfortable retirement, a nice family, wonderful grandchildren. Life has thrown us curveballs but it’s been easier to weather the storms as a couple. Couples who are divorced late in life, do it tough. I can assure you that splitting assets does not leave anyone well off. Selling a normal house doesn’t give enough to buy two houses.
    Tib
    9th Feb 2018
    5:01pm
    True Sunday I support successful marriages. Accept my congratulations. Especially ones where the woman does her fair share. Also selling one house does not allow you to buy two. But selling one house and the superannuation allows a woman to have the house and some of his super, which isn't fair if she hasn't worked. Which is how it's set up. Which isn't fair if she never worked a day in her life.
    Sundays
    9th Feb 2018
    5:11pm
    Yes, I see what you’re saying. However, I have a friend who put herself through Uni while married and has a successful career. After the divorce, she was forced to pay spousal maintenance to her No hoper husband, who never worked. They shared custody and the arrangement continued until the children turned 18.
    Tib
    9th Feb 2018
    5:24pm
    Most of the time it's the other way around , so you know how we feel.
    Tib
    9th Feb 2018
    12:47pm
    YLC you made a mistake with the photo he should be holding a blank card and she should have the card with a dollar sign.
    Rosret
    9th Feb 2018
    2:33pm
    That AMP report is incorrect. The divorcees who remarry and each individual in the new relationship has pillaged their original home are set.
    The rest never really recover and especially not until the children are educated and married themselves.
    Tib
    9th Feb 2018
    2:47pm
    You're right but what you mean to say is pillaged their first partner. But since women get the majority of assets in divorce the only ones to benefit would be two women marrying each other. But if a man divorces early enough and isn't stupid enough to marry again he has a good chance for recovery. So for men the best advice is cut your losses early.

    9th Feb 2018
    5:13pm
    Any male who marries is crazy. The Family Court - thanks to feminism's lunacy - is incredibly biased against men, who will lose everything in case of divorce. That's why some resort to hitmen...
    Tib
    9th Feb 2018
    5:33pm
    You can get a hitman? No one tells me anything :)


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