Divorce compounds retirement risk

Divorced Americans are at greater risk of not being able to maintain their standard of living in retirement, according to new research conducted by the Center for Retirement Research at Boston College with the support of Prudential Financial, Inc. (NYSE: PRU).

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“A fundamental shift needs to take place in the way we think about retirement. Instead of solely thinking about accumulating savings, people also need to consider a plan for protecting and generating retirement income.” - Kent Sluyter, president, Prudential Annuities (Photo: Business Wire)

The research study, which compares the risk divorced households face using the center’s National Retirement Risk Index (NRRI), reveals divorced households have a 7 percentage point greater risk of not having adequate retirement income than households that have not experienced divorce. Among all households, exactly half are at risk of not having adequate retirement income.

“Millions of American households are at risk for not having adequate retirement income, and the challenge is even more acute among divorcees,” said Kent Sluyter, president of Prudential Annuities. “These are sobering numbers that highlight a fundamental shift that needs to take place in the way we think about retirement. Instead of solely thinking about accumulating savings, people also need to consider a plan for protecting and generating retirement income.”

For example, Sluyter said, annuities can offer a layer of protection because they can come with guaranteed income and other features to help generate income to supplement other retirement savings. And for people who are divorced or are contemplating divorce, annuities can be particularly important, particularly for the spouse with lower income.

The study’s findings show that on top of the normal retirement worries, divorced couples are dealing with legal fees, splitting assets and increased living expenses, and they must find ways of making up for that loss.

Sluyter noted that whatever course of action people take, whether divorced or not, access to financial planning and advice is key.

“Prudential, along with 23 other companies, recently established the Alliance for Lifetime Income with the goal of promoting greater understanding of how annuities can protect retirement income and help grow retirement savings so consumers can make informed decisions about the options that are right for them,” Sluyter said.