One of the most financially devastating things that can happen to a person in their golden years is divorcing a spouse.
What's frequently called "gray divorce" is happening more than ever before. In 1990, less than 9% of all divorces in the U.S. involved couples at least 50 years old. That figure jumped to 36% in 2019, according to a paper published in the the Journals of Gerontology in 2022.
Although employers are in no position to help salvage a person's marriage, they can help provide financial education so employees are prepared for anything that may come their way.
"Financial literacy is definitely missing, especially for workers with a pension nearing their retirement," says Yonatan Levoritz, a divorce and family law attorney at the Levoritz Law Firm in New York. "Younger people seem to understand it better."
The average divorce can cost a person between $15,000 to $20,000, according to Forbes. This financial hit can be particularly devastating when an employee is late in their career, or even already retired, because they have fewer years to make up any lost ground financially, Levoritz says.
"Time is not on their side," he adds. "When you are 30 and getting divorced, you can start over. When you are 50 or older, it is very difficult."
Money that had been squirreled away in retirement savings accounts, such as a 401(k), could be divided during the divorce proceedings. A person's pension payout could also be split in two. That's on top of other assets, such as a house, potentially needing to be sold with the profits divided between the two parties.
This financial hardship can force a retiree to end up going back into the workforce, Levoritz says. Almost half of retirees have continued working for financial reasons, though this included motivations beyond divorce, according to T. Rowe Price, a global investment management firm.
Levoritz has also seen instances where couples who were considering getting divorced changed their minds once they calculated the cost of it.
"It will cost an arm and a leg," he explains. "You saved your entire life and now will be dividing up that money and losing out on your compounding interest."
This is where employers can step in and help, at least to a small degree. Companies need to do a better job of educating their staff members about basic financial concepts, such as the benefits of compounding interest, which is when an investor earns interest on both the money initially saved and the interest that is gained.
Understanding these concepts can help an individual make better financial decisions when separating from a spouse, Levoritz says. For instance, it is usually more advantageous for a person to be willing to make a different monetary concession, such as providing maintenance to the other person or giving up the family home, than it is to withdraw funds from a retirement account to settle a divorce proceeding.
"[Y]our growth rates are affected by the removal of money from the account," he adds.
Providing workers with access to financial advisers as part of their overall benefits package and encouraging attendance of financial seminars on retirement planning are also key. Offering a legal plan is another relatively cheap way for a company to provide a helpful benefit to staff members.
"This provides employees with a professional that can answer questions," Levoritz says. "Employers should do the same thing with financial advisors or certified divorce planners, who can help give employees an idea as to what they should trade and if the trade is worth it."
