Not Sure About Retirement? A Common And Troubling Problem For Divorcing Women
Take a moment to clear your mind. Now, imagine how an “ideal” marriage would operate in regards to finances. What do you see? I see a partnership built on mutual respect with open lines of communication. Spouses are fully informed and equally able to manage all aspects of the marital finances. No one feels nervous, uninformed, and pressured. Money is not a source of contention, resentment, or mistrust. Both spouses are working together to achieve the same set of goals, including a successfully retirement.
Sound too good to be true? As we might have guessed and or know from personal experience, most marriages fall a tad short of this vision.
How do married couples handle finances and plan for retirement?
Fidelity Investments conducts an online biennial Couples Retirement Study https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/couples-retirement-fact-sheet.pdf which examines how couples deal with the family finances, especially in regards to retirement. (It appears that the study has not been conducted since this one in 2015)
The 2015 Fidelity Investments Couples Retirement Study analyzes retirement expectations and preparedness among 1051 couples (2102 individuals). Respondents were required to be at least 25 years old, married or in a long-term committed relationship and living with their respective partner. The minimum household income was $75,000 and/or at least $100,000 in investable assets. The survey shows that among the couples who participated, there are significant differences in what each partner knows and expects for retirement.
Some key findings of the study:
72% of the couples say that they communicate exceptionally or very well, yet more than four in 10 (43%) failed to correctly identify how much their partner makes. 10% got it wrong by $25,000 or more.
There were other important disconnects between couples including:
36% of couples disagreed on the amount of the household’s investible assets.
When asked how much they will need to save to maintain their current lifestyle in retirement, nearly half (48%) have “no idea”. 47% are in disagreement about the amount that is needed.
When asked to estimate their Social Security payout in retirement, 60% of couples either don’t know or aren’t sure. Even more disturbing, almost half (49%) of Boomers fall into this category.
There is more: Respondents when asked how much they expect to receive in monthly retirement income, 52% have “no idea”, This represents a 5% increase (47%) from the 2013 survey. 51% of couples responded that they are concerned they will outlive their savings. This is up 9% from 2013 when 42% echoed this concern.
Despite these concerns, only 21% of couples have developed a detailed retirement plan to help address outliving their savings. 36% of couples surveyed said that they have not even thought about a retirement plan yet. This represents an 8% increase form 2018 when 28% responded that they have not thought about a retirement plan.
In conclusion, the study conducted by Fidelity found that American couples are worrying more yet planning less for retirement.
As a Certified Divorce Financial Analyst (CDFA)
I work with women before, during, and after their divorce. I notice that in many instances where there is some retirement planning, savings and investments, it is typically the husband who has done it. The wife for whatever the reason may be doesn’t take an active role and essentially is in the dark about what is going on. In the event of a divorce, this lack of understanding has an impact on a woman’s financial future.
Now that the household income is cut in half, how do you plan on continuing to fund what will be your successful retirement? If you do not know the answers to your financial future when you are married, the level of difficulty to answer these questions increases tenfold if you are getting divorced. The emotions and strain of a divorce do not always allow us to answer questions with a clear mindset. I am here to help you answer these questions. Answer these questions from a position of strength and knowledge. Do not answer them from a position of pure emotion.
Achieving a successful retirement should be the primary goal for all of us.
After all, this is why we have been working. In an ideal world married couples are working together, saving and planning for retirement. There is an open discussion on building that retirement plan with their tax and financial advisors. Any changes that need to be done to the plan are made on a proactive basis. In the real world, things do not work out this efficiently and effectively. If you are happily married, I still encourage you to work towards improving your knowledge base in regards to finances. Have open dialog with your spouse. Do not let somebody else hold the keys to your future. This applies as well whatever stage of the divorce process you are in.
Similarly, we will all face unique and significant challenges to have a successful retirement. The best way to meet these challenges is to educate yourself early on. The worst strategy is to stay uninformed!