Counting the cost of 'grey' divorce
One of the saddest personal finance stories of the year is a recent piece in The New York Times about the growth of what the author calls "silver or grey divorces".
These divorces involve couples who have been married or in a de facto relationship for 30 years or so who make a decision to separate when close to their retirement or in early retirement.
The article quotes statistics from the National Centre for Family and Marriage Research in Ohio stating that people aged over 50 were twice as likely to divorce in 2014 than in 1990. And the increase was even higher for those aged over 65.
How does the Australian experience with grey divorce compare?
The latest-available divorce statistics from the ABS show that the rate of divorce among those aged over 55 has increased by 80 per cent for men and 68 per cent for women during the 20 years to 2013.
It should be emphasised, however, that the average age for divorce in Australia was 43.5 years in 2013 - up from 37.9 years over two decades.
Certainly, the rate of divorces becomes lower as couples age. Yet the statistics indicate that while divorce rates have tended to plateau for middle-aged and younger couples, the rate of divorce for those over 55 has risen.
Overall, ABS statistics based on marriages and divorces in 2013 suggest that more than 40 per cent of marriages will end in divorce. (Significantly, none of these divorce figures include de facto relationships.)
Sadly, one of the greatest destroyers of personal wealth is the breakdown of marriages and de facto relationships.
Separation means that a former couple's assets - including the family home, their superannuation and their other investments - are split. Solely from a retirement perspective, a relationship breakdown means that not only are retirement savings divided but each person has to pay for separate accommodation.
Many separated individuals, of course, can no longer afford to own a home. And the reality is that it typically costs much more to finance the retirement of two single people than a couple.
Further, it can be extremely difficult for separated older spouses to rebuild their retirement savings. And this task can be even tougher for an individual if his or her partner had much of the control over family finances during a long relationship.
With the rapid ageing of the population together with seemingly ever-increasing longevity means that the rate of divorces among retiring baby boomers is likely to keep climbing.
This expectation underlines the desirability maximising retirement savings while still in the workforce and for both partners in a relationship to save as much as possible in super.
Sound personal financial practices include preparing for the unexpected and gaining quality professional advice when appropriate.
By Robin Bowerman
Principal & Head of Retail, Vanguard Investments Australia
05 November 2015