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Set aside that love stuff for a moment and ponder this question: Who’s worse off after her marriage ends — a widow or a divorcee?
The divorcee, financially speaking. Only 25 percent of divorced American adults recently surveyed by TD Ameritrade reported feeling financially secure, compared with 39 percent who were widowed and 43 percent who were married.
While it’s long established that divorce can harm your standard of living — particularly if you’re not the primary wage earner in the household — people rarely address the financial repercussions of divorce before it happens, says Diane Pappas, a financial analyst who works with divorcing couples and their lawyers.
“One percent are prepared — even those who are contemplating [divorce],” says Pappas. “And those who have been contemplating it have been doing it for 10 or 15 years.”
An oft-cited study found that women’s standard of living falls an average of 27 percent after a divorce, while men’s rises 10 percent. (“They say 27 percent. I say 50 percent,” says Pappas, who operates Solutions For Divorce in Gloucester, Mass., and is chair-elect of the board of advisers of the Institute for Divorce Financial Analysts.)
TD Ameritrade’s new survey aligns with that older research. While 36 percent of divorced men said they felt financially secure, only 19 percent of divorced women were as optimistic. As for outright pessimism, only 13 percent of ex-husbands admitted to being not at all financially secure — but 34 percent of ex-wives put themselves in that boat. (Widowers also felt more secure than widows, but the gender gap for these surviving spouses wasn’t as great.)
Regardless of gender, divorce can be especially problematic for the finances of older Americans, among whom the divorce rate is on the rise. “You might already be retired. Your assets are what they are,” says Pappas. “It’s not like you have more years to contribute to your retirement account.”
In a discussion of the survey, David Lynch, managing director of TD Ameritrade’s branches in the United States, referred to a comment made by an acquaintance who had undergone a divorce. “I had to start over at 55,” the man told Lynch.
Only 30 percent of divorced Americans said they were very secure in retirement — or expected to be, compared with 42 percent of widowed adults and 52 percent of married individuals.
While you can’t really establish a financial plan for divorce far ahead of time, says Pappas, you can take a few simple measures while still happily married that can help you financially if your marriage were to dissolve.
For starters, she says, “In your marriage, make sure you know what your assets are.” Knowing what you and your spouse own, and in whose name those assets are, is important when it’s time to divide those up. Pappas, who notes she has worked on nearly 100 divorce cases, says, “A lot of times the wife has no idea of what the assets are” — a situation she terms “very sad.”
Are you inheriting property, or do you think you will? It’s very important to decide what to do with it, she says. “If you keep it separate from your marital assets — if you keep it in your name,” she says, “chances are better, but not guaranteed, that it will not be considered a marital asset” and thus won’t have to be shared with your spouse after a breakup.
And if you’re getting married for the second time, she says, you should definitely have a prenuptial agreement, in order to have greater control over the money you bring to the marriage. “You don’t want it to go to your second spouse’s children,” she says. “You want it to go to your children. You want it to stay on your side.”