Financially speaking, marriage makes a lot of sense. Especially in the modern era, it often means merging two incomes and splitting fixed costs like the rent or mortgage, utilities and a variety of other bills.
Divorce, on the other hand, is worse than singledom. Not only are you going back to one salary, but you’re usually stuck with couple- or family-size expenses, at least until you can downsize your home or trade in the minivan. And then, of course, there are all the legal costs.
But the extent to which divorce wrecks your finances may depend in part on when you split up, according to research from the U.S.
When economists Angela Hung and David Knapp of the RAND Corporation looked at married couples who broke up in their 30s or in their 50s, they found significant differences in the long-run monetary impact of divorce.
The motivation for the study was to look at so-called “grey divorce,” the trend that has a growing number of baby boomers splitting up later in their silver years. Among Americans aged 50 or older, the divorce rate has roughly doubled since the 1990s, while it held steady or decreased for younger age groups, according to a 2017 Pew Research Center report.
Much the same is going on in Canada, where the divorce rate among adults in their late 50s has reached 20 per cent, higher than in any other cohort, according to Statistics Canada.
Hung and Knapp wanted to see how de-coupling later in life affects retirement security.
The working hypothesis was that “if you get divorced in your 30s you still have time to re-enter the workforce if you need to or change your career path. You also have 30 to 40 years to accumulate assets [for retirement],” Hung said. “If you split up in your 50s, you have a much shorter time horizon.”
Grey divorce is usually worse for your wallet
The study largely bears out Hung and Knapp’s initial guess.
“Overall, median wealth for men and women who divorced earlier is greater than median wealth for men and women who divorced later,” the authors write.
That matches the experience of Toronto family law specialist Steve Benmor.
When people reach their 50s or 60s, “income and assets are cemented,” he said.
Along with the double whammy of reduced earnings and increased expenses that usually comes with any separation, older divorcées also face retirement, when income generally decreases for everyone, he noted.
“Suddenly, whatever budget had been put together or tacitly relied upon all those years, gets thrown out the window,” Benmor told Global News.
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Women who divorced in their 30s struggled more than men to recover
Divorcing early in life is generally less damaging, but that’s not true for everyone.
Data from Hung and Knapp’s analysis, which is based on a broader survey of Americans aged 51 and older, shows that among female boomers who got divorced and didn’t remarry, those who split from their spouses in their 30s did even worse financially than those who untied the knot in their 50s.
The study didn’t look at why that may be, but one hypothesis is that women of child-bearing age have a harder time rejigging their life and finances after divorce if they haven’t been working, said Hung.
“The path can be much more difficult than for men,” she told Global News.
Women who get divorced in their 50s, on the other hand, possibly benefit from dividing assets that have accumulated throughout a lifetime.
Anecdotal evidence, though, suggests the divorce conundrum for the current generation of women in their 30s has somewhat improved, said Benmor.
“For millennials, the financial situation may be very different,” he said, adding that he has handled several cases of younger couples splitting up, in which the woman emerged just as well and sometimes better than the man.
Still, regardless of the stage of life at which divorce happens, most people are able to recover, Benmor said.
“Timing matters, but so does character.”
© 2018 Global News, a division of Corus Entertainment Inc.