This Is the Single Best Way Divorced Women Can Secure a Successful Retirement

For women in particular, divorce is financially perilous — at least, that’s what nearly all the studies tell us.

There’s even a phenomenon sometimes referred to as the "divorce gap": It was documented by Stephen Jenkins, a professor then working at the University of Essex, who found in a 2008 study that women who divorce see their income fall by more than a fifth, and stay low — while the men they divorce see their income rise by about a third.

But now comes a new study, from the Center for Retirement Research at Boston College, suggesting that when it comes to their long-term financial wellbeing, divorced women may not be as badly off as previously feared. The key to success involves leaving the marriage with a key to a home of your own.

The survey found that formerly married but now divorced women historically have been better off — in terms of the assets they have accumulated in preparation for divorce — than single, never married women. And the critical factor, the CRR concludes, is home ownership — because “divorced single women are more likely than those not divorced to own a house.

The theory sounds great, and data doesn’t lie. But it can mask a lot of nuances.

Several divorce lawyers and financial advisors — many of whom have seen too many female clients insist on keeping the house in a split, even when those women don’t have the resources to keep up with mortgage payments, maintain the property, pay taxes and provide for unexpected crises — find the CRR’s data intriguing but also unnerving. After all, they say, keeping the house isn't automatically the best move for everyone, especially in the cases where there's another major asset on the table.

“I’m a bit concerned that it will encourage more of them to fight for the house when they shouldn’t, when it’s the wrong financial move,” says Renée Senes, a financial advisor in Concord, Mass., and co-author of a book advising soon-to-be divorcées and their former husbands how to avoid costly divorce errors.

Senes herself pursued the marital house in her own divorce, and hung on to it until her youngest child graduated from high school 15 years later. “I don’t regret it, but the occupancy costs were high,” she said. So, she says, were the costs to sell: redoing the bathroom, kitchen, and septic system, as well as staging the house to attract bidders. She then had to pay taxes on all of the capital gains, instead of sharing them with her ex-spouse.

Geoff Sanzenbacher, associate research director at CRR and one of the researchers involved in producing the report, notes that while the study itself specifically mentions homeownership, there's actually a broader point to be made. Divorced women benefit from receiving a share of marital assets, whereas single, never-married women must rely on going it alone when saving and accumulating assets that can be used to finance their retirement.

“What we’re saying, indirectly, is that $100,000 of house value equates to $100,000 of 401(k) savings or any other asset,” he says.

An Asset That's Hard to Tap

Sanzenbacher adds one important caveat: “What is critical, though: Whatever assets you decide to accept in the divorce settlement, you be able to commit to saving intact for retirement," he says. "With the house, it’s easier to commit do that, because it’s a single large, illiquid asset.”

The problem, Sanzenbacher says, is that it might be more tempting for divorced women — who find themselves with lower household income than when they were part of a couple — to dip into assets intended for retirement, whether to fund holidays or a child’s college tuition.

“Retirement security involves hanging onto whatever assets you get in the settlement,” he explains. “The key issue is asset accumulation.”

While single women may earn more, they don’t seem to fare as well as do even their divorced sisters when it comes to acquiring the kind of assets — whether a house or a share in an investment portfolio — that give them an edge in preparing for retirement.

Of course, the data suggest that in aggregate, for both men and women alike, marrying and staying married is best from a financial standpoint. Still, CRR’s research suggests that divorce may not be as financially devastating to women as previously supposed, as long as they and their lawyers fight for an equitable division of assets, and one that takes into account the woman’s current financial position (is she working?) and her likely future plans.

In some cases, that may involve asking for the house — but not always, regardless of the CRR findings.

“I have seen people who have fought very, very, really hard for the house [end up having to] give it up, and that decision has been financially costly for them,” says Heather Locus, a financial advisor at Balasa Dinverno Foltz. “I really hate seeing women insisting on getting the house and then, within a year, being forced to sell because they can’t afford to keep it up” or can’t qualify for a mortgage in their own name.

Which House?

It’s worth noting that while CRR’s research makes an explicit link between the greater home ownership levels among divorced women (compared with never-married women) and their former group’s resilience in divorce and preparedness for retirement, the study never explicitly says that it’s the matrimonial home that is the house in question.

In fact, notes, Kelly Murray, head of continuing legal education at Vanderbilt Law School in Nashville (and an expert on the emerging field of real estate and divorce), the trick is to ensure that a new divorcée understands as rapidly as possible all the ramifications of hanging onto the marital home, and decides, with the help of cooler heads around her, whether she might be better off rightsizing immediately.

Murray has no objection to divorcées owning a house — but hanging on to the house is another matter altogether. “Everyone who owns a home has an opportunity for higher wealth,” she agrees. But if you’re trying to support the same property with a single, usually lower, income, it’s crucial to take a good, hard look at questions like taxes and the ability to fund repairs and emergencies.

There are also the forgone returns to consider: the potential loss of investment gains you would make on your share of a retirement portfolio.

After all, ending up house-rich but cash-poor isn’t a great way to prepare for retirement. That’s why matrimonial lawyers like Jacqueline Newman, managing partner at Barkman Bottger Newman & Rodd, a New York firm specializing in divorce, spends a lot of her time pushing her clients to focus on the longer term.

“I completely understand the psychological components, but I want them to look at the bigger picture," she says. "Do they see themselves still living this life, in this house, in 5, 10, 20, 30 years? And if you think you’re going to sell, then sell now.”