Divorced People 23% More Likely to Have Nothing Saved for Retirement Than Married People

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Updated on Tuesday, March 30, 2021

You said “I do,” but now you don’t. Divorce can certainly take a toll on one’s emotions, but it’s the long-term financial toll that may come as a surprise. Sure, there are immediate costs, such as legal fees and moving expenses, but the impact on one’s retirement savings and overall financial health may reverberate well into the future.

How much of an impact? A new study from MagnifyMoney analyzing Federal Reserve data found that married couples are much more prepared for retirement than their divorced peers. In fact, divorced people are 23% more likely to have nothing saved for retirement.

Key findings

  • 23% more divorced people have nothing in their retirement accounts than married people. Breaking that down, 54% of divorced or separated people and 44% of married people have no money in their retirement accounts.
  • Divorced people on average have at least 7 times less in their retirement accounts than married people — $15,083 versus $107,011.
  • Divorced people say their retirement egg needs to be just 28% less than what married people think they need ($1.2 million, versus $1.7 million for married people).
  • Divorced people believe they’re 75% short, on average, of their retirement needs on average, while married people believe they’re 34% short.

Divorced people 23% less likely to have retirement savings than married people

Can divorce tarnish one’s golden years? Financially, perhaps. Our study found that divorced people are far less prepared for retirement than their married counterparts.

In fact, 54% of divorced or separated people report having no money saved for retirement at all. Of those who do, they’ve only saved an average of $37,000 in retirement, savings and investment accounts combined. Compare that to the average of $141,225 that married couples have saved in the same accounts, and the gap is wide.

However, just because married couples are more prepared for retirement in general than their divorced peers doesn’t mean they’re well prepared. In fact, 44% of them have nothing saved for retirement.

Neither group is particularly optimistic that they’ll have enough saved by retirement either, but married couples are more confident:

  • 58% of divorced or separated people said they don’t expect to have enough money for retirement
  • 47% of married couples said they think they won’t have enough money for retirement

They may be right, too. Our study found that married couples said they need $1.7 million to retire, while divorced or separated people said they need nearly $1.2 million. Both groups have hefty gaps between those amounts and the funds they have saved.

Once again, that gap is larger for divorced people. Our study found the retirement funding gap for married couples to be 34%, while divorcees had a retirement funding gap of 75%.

The average household income for married couples was $147,365, compared with the average divorced person’s income of $73,308.

Retirement accounts 7-plus times bigger for married couples

The retirement-preparedness divide is especially wide when looking at the retirement account balances of those who are married compared with those who are divorced. In fact, our study found that married people’s accounts are more than seven times heftier than those of divorced people — an average of $107,011, versus $15,083.

Across the marital-slanted financial board, in general, divorced people tend to come up short when it comes to assets compared with married people:

  • Nearly half of divorced people — 48% — don’t have any money in savings accounts, compared with 44% of married people.
  • While 20% of married people don’t own a home, that pales in comparison to the 41% of divorced or separated people who also don’t own a home.
  • Overall, 11% of those who are divorced said they don’t own any asset type, compared with 8% of married couples.

Wealth of divorced people vs. married couples

As for overall wealth, it’s once again divorced people who are often at a financial disadvantage. Married couples have 3.7 times more overall wealth on average than those who are divorced. When taking into account the average assets of married couples ($1,252,854) and average liabilities ($153,995), which includes debts like mortgages, credit cards and auto loans, the average total wealth of married couples is $1,098,859.

In comparison, people who are divorced or separated have an average of $391,322 in assets and $95,484 in liabilities, equaling an average total wealth amount of $295,838.

How expensive is a divorce?

The average cost of divorce is $12,900, according to a nationwide survey from Nolo, but that can vary based on where you live, whether you have children, how long the divorce takes and other factors. That nearly $13,000 includes attorney fees and other court costs, including real estate appraisers and tax advisors.

While that number can be much higher or lower, it’s often a significant amount, and it may contribute to the common theme we found: When it comes to savings and assets, those who are divorced are lagging behind their married couple cohorts.

Such steep — and likely unanticipated — expenses are likely to take a toll on most people’s finances. Things like retirement savings and the purchase of assets may be put on hold as funds are needed to cover those expenses. None of this is to say that anyone should stay married just to fare better financially, but it’s important for those who are considering a divorce to understand the potential financial impact and to prepare for it as best as possible.

There are often ways to save when it comes to divorce. To lower the potential cost of a separation, we recommend negotiating terms with your spouse before filing, getting a postnuptial agreement and partaking in mediation.

5 ways to save for retirement after a divorce

Saving for retirement is important, no matter your marital status. Here are five tips to help.

  • Take advantage of employer-sponsored retirement plans. If your employer offers a 401(k), make sure you take advantage of any employer-matching incentives and consider ramping up the overall amount you contribute if you’re able.
  • Consider an individual retirement account (IRA). Beyond employer-sponsored plans, you may want to look at other retirement plans, such as IRAs. There are two primary types of IRAs: A Traditional IRA that lets you invest money untaxed and then pay taxes on it when you withdraw it in retirement, and a Roth IRA, in which you invest post-tax money now and then are able to withdraw the funds tax-free in retirement. For each, you can contribute up to $6,000 in 2021 ($7,000 for those 50 and older).
  • Start an investment account. If you don’t already have one, you may want to set up an investment account. Robo-advisors offer a simple way to start investing funds in a diversified portfolio, and the fees are typically less than those of a traditional financial advisor.
  • Evaluate your risk. If retirement is a ways off, you may want to take more investment risks. If they pay off, they may help recoup your divorce losses. If not, you still have time to make adjustments before you need the funds. A financial advisor can help you balance your goals and timeline with the appropriate level of risk.
  • Make a pre-marriage plan. An upfront prenuptial agreement can save people big time. A prenup can help protect retirement assets and avoid a messy battle in divorce court. While it may be too late in some cases, it’s good to remember down the road.

Methodology

Analysts analyzed data from the Federal Reserve’s 2019 Survey of Consumer Finances — the latest available data — to examine the financial health of divorced people and married couples. We also used data from the supplementary module of the Survey of Consumer Expectations, collected between 2015 and 2018.

The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.