Why gray divorce is a significant financial risk for women

Breaking up in old age can be costly, especially for women.

The rate of “gray divorce” — a term that describes divorce at age 50 and older — doubled from 1990 to 2019, according to a 2022 study published in The Journals of Gerontology. It tripled for adults over age 65.

In 1970, about 8% of Americans who divorced were age 50 and older. By 2019, that share had jumped to an “astounding” 36%, the study found.

About 1 in 10 people — 9% — who divorced in 2019 were at least 65 years old.

Meanwhile, rates of divorce have declined among younger adults, according to Susan Brown and I-Fen Lin, sociology professors at Bowling Green State University who authored the analysis.

In heterosexual relationships, gray divorce typically “has more negative implications for women than for men,” said Kamila Elliott, a certified financial planner and co-founder of Collective Wealth Partners, based in Atlanta.

Studies suggest women’s household income generally drops between 23% and 40% in the year after a divorce.

The economic effects are “less severe” for men, with some studies showing their income may even rise after a breakup, according to Laura Tach and Alicia Eads, sociology professors at Cornell University and the University of Toronto, respectively. The duo have co-authored several papers on the topic.

Those financial disparities seem to be more muted for younger generations of women due to a greater likelihood of them working relative to older cohorts, experts said. Many older adults who divorce today adhered to the traditional notion of a man as a household’s sole breadwinner, they said.

“We’re seeing women in divorce today who are of the generation where they just didn’t work their entire life,” said Natalie Colley, a CFP based in New York and senior lead advisor at Francis Financial.

Women also tend to earn lower incomes than men due to a persistent wage gap; they tend to have less savings, and near-retirees who are divorcing don’t have much time to make up the difference. Divorced women can claim a Social Security benefit based on their own earnings or a former spouse’s earnings history, but the latter option is generally worth only up to half of an ex’s benefit.

Remarrying or cohabitating generally helps bolster one’s finances via pooling of resources. But women who undergo gray divorce are less likely to do so than men: Only 22% of women re-partnered in the decade after gray divorce versus 37% of men, putting them at “sustained economic disadvantage into old age,” according to a separate paper by Brown and Lin.

Altogether, women’s standard of living declined by 45% following a gray divorce, while the drop for men was less severe, at 21%, Brown and Lin wrote.

These negative economic outcomes persisted over time, “indicating that gray divorce operates as a chronic economic strain,” they said.

Poverty levels among women old enough to qualify for Social Security retirement benefits are almost twice as high for women who divorced after age 50 as those who divorced before age 50, Brown and Lin found; the same isn’t true for men.

Here are some steps women can take to protect against the financial pitfalls of a potential future divorce, according to financial advisors.

Get active in your household finances. “Women should take a very active role in their household finances,” said Elliott, a member of CNBC’s Advisor Council.

Women shouldn’t get to a point where they’re unaware of their household’s spending, savings, and mortgage payments and interest rates, for example, she said. Such information could come as a surprise upon divorce, and women may learn they’re not financially well-protected.

Additionally, being unengaged from financial decision-making may mean they’re ill-equipped to handle their own finances if they become single, Colley said.

“I can’t tell you how many times I’ve met couples where the woman had no idea what the husband was doing financially,” Elliott said.

Have access to your own money. Many couples commingle their financial accounts. Many women may also be authorized users of credit cards instead of primary owners, Elliott said.

But women should ensure they have access to their own funds so their spouse can’t shut off the financial spigot if a relationship sours, Elliott said.

Additionally, women should consider investing or saving in their own retirement account, she added.

Retirement savers generally need earned income to open and contribute to an individual retirement account; however, women who don’t work can open a “spousal IRA” based on their spouse’s income. (You must be married and file a joint tax return to open one.)

Be strategic about claiming Social Security. Social Security is an important source of guaranteed income in retirement, especially for women.

The sequence of claiming benefits can be important for married couples and can help women hedge against divorce (or widowhood) later, Colley said.

For example, let’s say a husband is eligible for a larger Social Security benefit relative to his female spouse. He can defer claiming benefits to age 70, thereby maximizing his lifetime monthly benefit.

That increases the monthly benefit his wife could receive upon divorce or widowhood, and helps maximize a woman’s cash flow in such circumstances, Colley said.

Save some alimony. If a woman receives alimony after a divorce, she should aim to save some of it, instead of spending it all, Elliott said. That’s because alimony generally only lasts for a certain period — and women must make it last, she said.

“Just because you get alimony, it’s not business as usual” relative to spending levels, she said. “You probably need to reassess your lifestyle.”

Consider a prenuptial or postnuptial agreement. Couples can also consider a prenuptial agreement or postnuptial agreement that contains provisions to protect a woman financially if she leaves the workforce to care for their children, for example, Colley said.

Doing so generally permanently dents the caregiver’s earning power, and a legal agreement can help insulate against that financial risk, she added. For example, perhaps it stipulates the woman gets a guaranteed stream of income for a certain number of years if the marriage dissolves, Colley said. She recommends working with an attorney who specializes in such legal documents.