An article in American newspaper Forbes has illustrated some of the difficulties faced by divorced women on retirement. While the story has an American focus, much of the advice is universal and applies equally to Australians.
There are a number of unique financial challenges faced by divorced women. Older divorced women who may have been in marriages with more traditional gender roles are often less financially literate than their spouses, and did not have a retirement savings (or superannuation) strategy. Having a retirement savings/superannuation strategy however is especially important to women due to their longer average life expectancy which means their retirement simply costs more and requires more money to have been saved. One way this impacts women is that some funds may pay out women a lower fortnightly benefit than men, even if they had the same fund value, simply because the fund needs to last longer (sometimes as much as 10-12 years statistically speaking).
In addition, women often have a lower earning potential after divorce, and therefore less time to build up adequate retirement savings, due to having spent years out of the workforce raising children: stay-at-home mothers may have ‘sacrificed their peak earning years and career momentum’. Making matters worse, the gender wage gap–which exists in Australia–means women ultimately have less money set aside for retirement.
The story points out:
“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.”
To combat these challenges, Forbes notes it is essential that women educate themselves on the basics of personal financial management as early as possible, including well before divorce. Women need to be aware of the importance of prioritising saving for retirement and of making the necessary lifestyle modifications this may require. They should seek the help of financial professionals and if possible, “find someone with expertise in the specific financial needs of divorced women”. And during divorce proceedings, “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.”
Do you need assistance with your divorce or would you like a referral to our recommended financial advisors? Are you in an intact marriage or relationship and wishing to negotiate a binding financial agreement (or pre-nup) to secure your needs should you divorce? If so, please contact Alliance Family Law on (02) 6223 2400 today.