Financial Fallout from ‘Gray Divorce’

In the 1960s and 1970s, the baby boom generation had a reputation for breaking down societal norms for behavior – and they’re at it again.

Between 1990 and 2010, the rate of individuals over age 50 who become newly divorced in a year doubled to more than 10 people affected per 1,000 married people, according to Susan Brown, a sociologist at Bowling Green State University. Studies by Brown and others are emerging that show this important trend of “gray divorce” is having negative consequences for baby boomers’ financial security in old age.

“Individuals who go through gray divorce are considerably economically disadvantaged, and they are a growing demographic group,” Brown said. She estimates nearly 650,000 people over 50 were involved in divorces in 2010 alone.

Couples who marry and remain married have a big financial advantage, because they’re able to share their resources and split their expenses, making them much better off than single people who carry the full burden of mortgages, rents and living expenses for years or decades. New research indicates that divorce, by effectively throwing many baby boomers back into the disadvantaged singles category, causes their personal financial status to deteriorate at just the wrong time – around retirement.

One study tracking baby boomers’ wealth back to 1985 found “large negative financial consequences” for those who divorce at some point in their lives. The typical divorced boomer had 77 percent less wealth – home value plus financial and retirement assets minus mortgage and other debts – than in the years prior to divorcing.

Poverty falls harder on divorced women than men, according to Brown’s new research, which used a survey of older Americans to compare poverty rates for people with various “marital biographies,” including never married, divorced, and remarried after divorce.

She found that the odds of women over 62 falling into poverty after going through a gray divorce were comparable to that of women who never married. Further, older divorced women who remarry “are much better off than the ones who remain in the gray divorced state,” she added. But that won’t help the majority of them, she said, because “most aren’t going to get remarried.”

To stay current on our Squared Away blog, we invite you to join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here.