February 6, 2018

Divorce a Retirement Roadblock

Clients and advisers alike often also overlook the possibility of losing a spouse

Reported by John Manganaro

Art by Andrea D’Aquino

TD Ameritrade’s Financial Challenges of Divorce and Widowhood survey of 2,000 adults ages 37 and older gives insight into the financial lives of the 25 million divorced and 14.5 million widows and widowers in the U.S.

While the survey contains points of optimism, the analysis, in some respects, is stark. Overall, the firm says, the “unfortunate reality is that approximately four in 10 marriages eventually end in divorce, and about a quarter of Americans ages 65 and older are widowed.” Therefore, these issues are of paramount importance for all advisers and clients to consider.

Naturally, this may be a challenging conversation for some advisers or clients, but, researchers argue, it does not have to be: “Considering divorce or the loss of a spouse is a smart addition to any long-term financial plan. It’s no different than planning for things such as a major illness, disability or potential long-term care needs.”

As it stands today, married couples are not sufficiently addressing this topic with their advisers. Fully two-thirds of married individuals admit having no financial plan in place in the event of a divorce or becoming widowed. Despite the lack of planning, seven in 10 men and six in 10 women also say they are confident in their ability to manage their own financial situation in the event of a divorce or a spouse passing away.

TD Ameritrade researchers warn that this task often proves far more difficult and damaging than couples anticipate: “Married individuals report an annual personal income of $61,700. That is $13,100 more than widows/widowers and $9,800 more than those who are divorced.”

David Lynch, managing director and head of branches for TD Ameritrade, says advance planning could provide a much needed boost in financial security for those who “unexpectedly end up alone at any phase of their life. Compared with the 43% of married Americans who currently feel financially secure, just a quarter of divorced people say the same. In an average month, nearly half of divorced individuals are not saving or investing any of their take-home pay, versus 32% for their married peers.”