The financial impact of a divorce tends to be one of its more overlooked consequences. For women in particular, what happens next after a divorce can be especially devastating to their financial security. It’s a phenomenon known as the “divorce gap,” and was first documented in a study that showed divorced were more likely to see their income fall by a fifth and stay that way, whereas divorced men were more likely to see their income rise by a third.
But according to a new study published in June this year by the Center for Retirement Research at Boston College, there’s a way for divorced women to their retirement: having their own home.
The study also found that formerly married but currently divorced women have historically been more financially secure than single women who have never married. The Center for Retirement Research attributed the critical factor on home ownership, noting that divorced women are more likely to own a house than single, never married women.
But while these results speak volumes of just what it takes for women to survive a divorce in terms of assets and finances, many divorce lawyers and financial advisors are concerned that it might encourage divorcing women to insist on keeping the house in a separation even when they don’t have the means to continue paying the mortgage, pay taxes, and maintain the property, all while paying for all their other living expenses.
In other words, keeping the house is not necessarily the best move in all divorce cases.
The researchers, however, note that while the study specifically mentions home ownership as a factor for moving on from a divorce in a more financially sound position, they added that there’s a broader point to be understood. It’s that divorced women tend to benefit from receiving a fair share of any marital assets, compared to never-married women who can only depend on themselves when saving and accumulating assets to fund their retirement.
But there’s an important catch.
The reason the report specifically mentions a home is because of its illiquid nature. In other words, assets that divorcing women accept in the settlement should be kept intact until retirement. And it’s much easier to do that with a house, which also offers the benefit of building equity. But for other assets converted into cash for retirement savings, the researchers note that there’s a high risk of women dipping into their savings for other expenses, whether it’s a holiday or a child’s college tuition.
The report also adds that when it comes right down to it, regardless of gender, marrying and staying married is still the best decision from a purely financial standpoint. The study also reveals that overall, women benefit from an equitable division of assets with the help of their lawyers.