A sound financial plan not only covers what you expect to need money for in future years, but also factors in life’s unexpected events. Yet a new survey suggests that many married consumers have not considered what they would do if they find themselves without their spouse because of divorce or death.
Investment company TD Ameritrade surveyed 2,000 adults, aged 40 to 79, who have at least $25,000 in investable assets to find out how they are preparing financially for retirement and other major life changes. While most respondents were optimistic that they could handle whatever life throws their way, many did not have the financial plans in place to back that sentiment up.
An overwhelming 87% of respondents said they were confident they could manage their finances alone if they later divorced or if their spouse were to pass away. Yet 41% said they had no plan in place that factors in either of those events.
Men were less likely to be prepared, as 45% said they had no financial plan that factored in divorce or the death of a spouse, compared to 36% of women who said they didn’t have such a plan.
The financial implications of divorce or death
One way to plan for the possibility of divorce is through a prenuptial agreement, which lays out how a couple will split their assets should the marriage end. A vast majority of survey respondents — 94% — said they did not have a prenuptial agreement in place.
Failing to plan for the possibility of divorce or death can be risky. According to the Pew Research Center, the divorce rate for those aged 50 or older roughly doubled between 1990 and 2015. And if a couple doesn’t get divorced, it’s likely that one spouse will outlive the other.
There is also much to learn from those who have already divorced. One of the biggest lessons: Divorce can have a negative impact on one’s ability to prepare for retirement. According to the survey, 40% of respondents who were divorced have less than $50,000 saved for retirement, compared to 32% of consumers overall in the same age bracket.
Also, among divorced respondents…
- 40% said getting divorced threw their retirement plans off course.
- 35% said having a prenuptial agreement in place would have made the divorce much smoother.
- 33% said they delayed their divorce longer than they wanted to because of financial reasons.
No one wants to think about a loved one dying or the possible end of a marriage. However, a failure to plan can not only derail your retirement, but could also leave you in debt and unable to handle your day-to-day expenses.
Being proactive might mean buying life insurance to ensure that a surviving spouse’s financial needs will be met. Likewise, you may want to educate yourself about the financial aspects of divorce, such as how credit card debt would be split if a marriage were to dissolve.