By now you’ve probably read the news about California’s ex-first couple. Arnold Schwarzenegger and Maria Shriver are likely headed toward divorce. I’ll leave the legal advice to the lawyers and the marital advice to the counselors, but as far as retirement is concerned, my advice to Maria is don’t get remarried.
It’s pretty well documented that women experience a decline in financial well being immediately following the break-up of a marriage. Alimony and child support typically don’t make up for the loss in family income for households headed by divorced women. But according to a recent study, that’s not the end of the story.
Researchers at the University of Connecticut, Social Security Administration, and National Institute of Aging combed through Census Bureau and Social Security data for the 40-year period from 1968 to 2008, pulling a sample of 2,471 women, 598 of which divorced in the mid-1970’s. By studying this 40-year period, researchers were able to glean data on how divorce affected women’s earnings throughout their careers and into retirement. It turns out that, at least as far as retirement is concerned, women were better off if they never remarried.
Women can ease post-divorce financial pressures by remarrying or by earning more money. Women who never remarry rely more heavily on work to improve their economic situation. They typically return to work, work more hours, or secure more lucrative jobs. Just as Maria gave up her TV journalism career to follow Arnold to California’s capital, many married women cut back or stop working all together to raise families, a luxury that many divorced women can no longer afford. The increased labor supply among women who divorced in the 1970’s resulted in higher lifetime earnings than the earnings of their remarried or never-divorced peers. The earnings growth was greatest for divorced women who never remarried since remarriage tended to reduce a woman’s participation in the job market.
Those increased earnings enabled women to make larger contributions to retirement accounts as well as earn significantly larger Social Security benefits. In addition, divorced women were more likely to delay drawing Social Security benefits, resulting in higher lifetime benefits than married women, who tended to draw benefits earlier. This correlation existed for all divorced women, but the effect was greatest for divorced women who never remarried.
All is not lost if you make it through to retirement happily married. Even though your individual benefit is likely to be smaller than a divorced woman’s payout, your household retirement income is likely to be larger since two Social Security checks are usually larger than one. And, of course, having someone you love to share your golden years with may be a little more important to you than how big your individual Social Security check is.
Sydney Lagier is a former certified public accountant. Since retiring in 2008 at the age of 44, she has been writing about the transition from productive member of society to gal of leisure at her blog, Retirement: A Full-Time Job.