Each year, there are 50,000 divorces in Australia, giving us a higher divorce rate than China, France, New Zealand and the UK. While there's little doubt of the level of emotional impact that divorce can have on an individual, what are the financial repercussions? And who is the most affected?
Suncorp Insurance's report Untying the Knot examines the financial repercussions of divorce, shining a light on what exactly lies ahead, financially, for many Australian divorcees. The report highlights some alarming statistics, including the fact that legal separation from a partner can mean significantly decreased wealth for years to come. In fact, for some, an extra decade of work past retirement may be on the cards.
Despite married and divorced individuals both hoping to retire at the same age, this 'hidden cost of divorce' can add 10 years to the working lives of Australians. It can be expected to come to those that don't consider superannuation in their divorce settlement.
Given that Australians are most likely to divorce in their early to mid-forties, there is a considerable amount of superannuation involved, with a 45 year old males' average superannuation balance being $128,000. This is compared to $42,000 for women at their average age at divorce of 42.
Considering super during divorce could mean the difference between being able to retire when you want to, rather than having to work well into your 70s and beyond. "It is critical, especially for Australian women, that they consider their partner's superannuation as our survey shows that divorced women are more than twice as likely to feel like they need to be more resilient and smarter when it comes to money.
While a happily married individual typically retires aged 65-69, a divorcee can expect to finish working at 75 or older, which encompasses 83% of Australian divorcees as they neglect superannuation as part of their separation entitlement.
The difference between accumulated lump sums at the average of divorce indicates that women are likely to be the hardest hit when it comes to divorce finances.
In fact, the study found that women were left feeling substantially less secure than men following a divorce, with 56% of women feeling like they need to get smarter (in comparison to 39% of men), 36% feeling vulnerable (compared to 19% of men), and 29% feeling alone with family responsibilities (to 8% of men).
But it's not just women who seem to be getting the raw deal when it comes to divorce. Legally separated Baby Boomers, were shown to feel more impacted and vulnerable than those who had divorced more recently such as Generation X. While Baby Boomers have likely been divorced for longer and having earned more super independently, Generation X divorcees were found to feel more secure. This misleading sense of security may be due to the 'clean break' they feel they have made whereas, in reality, when it comes to building wealth for the future or once their children are older, their monetary position may become strained and they find that financial vulnerability catches up with them.
Because of this, it can be reasonably suggested that female Baby Boomers are most affected by the consequences of divorce and superannuation. Despite being legally entitled to some of their husband's super, many women do not consider this valuable source of support during retirement.
Across both sexes overall, it is clear from Suncorp's research that superannuation is little more than an afterthought during settlement proceedings, with the family house, car, custody of children and division of household items all taking higher priority. In fact, only 17% of all Australian divorcees consider their partner's super during proceedings (just slightly more than who gets the family pet). Bearing in mind that superannuation is typically the second biggest asset after your house, these figures are particularly surprising.
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