New research from the Center for Retirement Research at Boston College has shown that divorce may be one of the biggest risks when it comes to your ability to save enough to have a comfortable retirement.
Researchers compare the destructiveness of a divorce to the Great Recession when it comes to how much it can affect retirement. The 2008 financial crisis added nine percentage points to the average person’s retirement risk. Divorce tends to add seven.
Why does divorce have such an enormous impact on retirement finances?
Families who have not been through a divorce will have an average net worth of $132,000, not including housing. A family that has been through a divorce can expect to see their net worth drop by $31,000 down to $101,000.
The study lists a multitude of reasons for this. Hefty legal costs need to be paid during a divorce, there may be less time spent at work due to changing household needs such as children that need to be cared for by one parent, or work hours may be lost due to time that needs to be invested in the divorce process.
Choosing to sell the family home includes transaction costs, and it may not always be the best time to sell unless you have somehow managed to schedule the divorce to match an upswing in the housing market. Unfortunately, not all divorces include those types of practicalities.
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