Divorce and Retirement Risks

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Divorce can significantly impact retirement plans. Learn how to protect your financial future with safe money alternatives. Explore your options today! According to the  American Psychological Association , about 40 to 50 percent of married couples get divorced. While it’s no secret that divorce disrupts lives, it can also threaten a divorcing couple’s financial future, according to new research. The Center for Retirement Research at Boston College (CRR), with the support of Prudential Financial, just released  a study . Their findings? Divorced Americans are at greater risk of not being able to maintain their standard of living in retirement.  The study compared the risk divorced households face using the center’s National Retirement Risk Index (NRRI). It revealed divorced households have a 7-percentage-point greater risk of not having adequate retirement income than households not experiencing divorce. Among all households, exactly half are at risk of  not having adequate retirement income . “Millions of American households are at risk for not having adequate retirement income, and the challenge is even more acute among divorcees,” said Kent Sluyter, president of Prudential Annuities . “These are sobering numbers that highlight a fundamental shift that needs to take place in the way we think about retirement. Instead of solely thinking about accumulating savings, people also need to consider  a plan for protecting and generating retirement income .” Challenges to Retirement Readiness The study, researched by Alicia H. Munnell, Wenliang Hou, and Geoffrey T. Sanzenbacher of the CRR, painted a sobering picture of the financial challenges divorcing couples face. “Divorcing couples must pay legal fees, split illiquid assets, and lose the economies of scale from having one instead of two households,” the study reports. “These changes almost certainly inhibit each spouse’s ability to save for retirement.” Another challenge is missing out on IRA or 401(k) assets. According to researchers Angela A. Hung and David Knapp in their working paper, “ Impact of Divorce on Retirement Security ,” in roughly half of divorces involving liquid retirement assets, such as money in an IRA or 401(