Why is gray divorce such a big financial risk for women?

Separating 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 in the Journal of Gerontology. It has tripled for adults over 65.

In 1970, about 8% of divorced Americans were 50 or older. The study found that by 2019, this percentage had jumped to a “staggering” 36%.

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

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

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

Studies show that a woman's household income generally declines by 23% to 40% in the year following divorce.

The economic impacts are “less severe” for men, with some studies showing that their income may rise after a breakup, according to Laura Tash and Alicia Eades, sociology professors at Cornell University and the University of Toronto, respectively. The duo has co-authored several research papers on this topic.

Experts said that these financial disparities seem less pronounced for younger generations of women due to their greater likelihood of working compared to older groups. They said that many of the elderly who are divorcing today adhere to the traditional idea that the man is the sole breadwinner for the family.

“We're seeing divorced women today who are part of the generation where they haven't worked their whole lives,” said Natalie Cooley, a New York-based CFO and senior advisor at Francis Financial.

Women also tend to have lower incomes than men due to the persistent wage gap; They tend to have less savings, and soon-to-be-divorced retirees don't have as much time to make up the difference. Divorced women can claim Social Security benefits based on their own earnings or an ex-spouse's earnings history, but the latter option is generally only worth up to half of the ex-spouse's benefits.

Remarriage or cohabitation generally helps strengthen an individual's finances by pooling resources. But women who undergo a gray divorce are less likely to do so than men: Only 22% of women took back their partner in the decade after their gray divorce versus 37% of men, putting them at “persistent economic disadvantage into old age,” according to a study. Separate paper from Brown and Lane.

Overall, women's standard of living fell by 45 percent after gray divorce, while the decline was less severe for men, at 21 percent, Brown and Lin wrote.

These negative economic outcomes persist over time, “suggesting that gray divorce acts as a chronic economic stressor,” they said.

Brown and Lin found that poverty levels among women old enough to qualify for Social Security retirement benefits are nearly twice as high for women who divorced after age 50 as for those who divorced before age 50. The same is not true for men.

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

Be active in your family's finances. “Women should play a very active role in their family finances,” Elliott, an advisory board member, told CNBC.

She said women should not reach a point where they are not aware of their family's spending, savings, mortgage payments and interest rates, for example. Such information can come as a surprise in divorce, and women may learn that they are not well protected financially.

Additionally, not participating in the financial decision-making process may mean they are ill-equipped to handle their finances if they become single, says Cooley.

“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.

Get your own money. Many couples mix up their financial accounts. Many women may also be authorized users of credit cards rather than primary owners, Elliott said.

But Elliott said women should make sure they have their own money so their husbands can't turn off the financial spigot if the relationship deteriorates.

In addition, women should consider investing or saving in their retirement account, she added.

Retirement savers generally need earned income to open and contribute to an individual retirement account; However, women who are not working can open a “spouse IRA” based on their husband’s income. (You must be married and file a joint tax return to open it.)

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

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

For example, suppose a husband qualifies for a larger Social Security benefit than his wife. He can postpone claiming benefits until age 70, thus maximizing his monthly life benefit.

Cooley said that this increases the monthly benefit that his wife can receive upon divorce or widowhood, and helps increase the woman's cash flow in such circumstances.

Save some expense. Elliott said that if a woman receives alimony after divorce, she should aim to save some of it, rather than spending it all. That's because alimony generally only lasts for a certain period — and the woman has to keep it going, she said.

“Just because you're getting the alimony, it's not business as usual” in terms of spending levels, she said. “Maybe you need to re-evaluate your lifestyle.”

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

Doing so generally permanently impairs the caregiver's earning capacity, she added, and a legal agreement can help protect against this financial risk. For example, the law might provide that a woman will have a guaranteed source of income for a certain number of years in the event of a marriage being dissolved, Kohli said. She recommends working with an attorney who specializes in such legal documents.