Although the “wealthy divorcee” myth still persists in society today, many people are aware of the fact that women don’t usually waltz away from divorce court with a wheel barrow full of their newly acquired millions. However, it appears that there is a wide discrepancy between the average person’s understanding of how divorce impacts a woman’s finances, and the actual reality.
When Congresswoman Carolyn Maloney of the U.S. Joint Economic Committee released a report earlier this year that addressed this very issue, it was something of a wake-up call for most of us. The report covers the gender pay gap, and addresses the long-term effects that it can have on women in today’s society. Not pretty, we assure you. But as if that wasn’t unsettling enough, the report also revealed how diminished pay for women over the long term cuts into retirement options significantly.
It is a well known fact that women tend to have lower salaries than men. This wage gap is being increasingly disputed in recent years, as more and more women argue that their pay should reflect their worth. But as of now, according to Congresswoman Maloney’s report, the average woman can expect to earn about $10,000 less than her average male counterpart during the course of one year.
Women earn less, and so have less chance to accrue a decent retirement account.
When you add that up over the course of a lifetime of work, it can reach up to half of a million dollars. Which is a significant loss, all by itself. But when you consider this loss from the perspective of retirement, the picture becomes even more grim. The report shows that in addition to the decreased earning power, women tend to leave the workforce more often than men do, usually for the purposes of having and caring for children. This means that they have even less opportunities to save for their retirements.
Now when you look at this through the lens of divorce, it gets even more depressing. Once a woman is divorced, she is usually either dependent on her own income to survive, or a combination of earned income and alimony or child support. Women are also usually the ones who provide the majority of the care for their children after divorce, which means that they carry an added financial burden that many men do not.
All of this serves to set the average divorced woman up for a considerably less stable retirement. When you consider the cost of divorce, and the amount of money that will be eaten up in attorney’s fees and other court costs, women are at a significant disadvantage when it comes to retirement.
If you are wondering, as a woman, how you can avoid this depressing statistic, we would encourage you to keep this in mind when planning for your divorce settlement. A substantial portion of your retirement will hinge on how well your divorce settlement was structured, and so it is critical that you discuss this with your attorney.
Family Law Attorney Brandy Thompson says that, “Thinking ahead now can save you a great deal of grief in the future. Take into consideration the future value of assets, not just the current value. Retirement accounts are a great asset to hang onto, as they offer tax free growth over time. For that reason, it may be in your best interest to let go of another, more appealing asset now in order to keep one that will set you up for a more comfortable retirement.”