Men fare better in hip pocket after split

IF FALLING in love is hard on the knees, falling out of love is harder on the wallet. Australian research shows that the assets of those who split up are $180,000 to $190,000 less than non-divorced people and the gap doubles to $360,000 to $390,000 six years after divorce.

By InvestSMART · 28 Oct 2012

By InvestSMART ·
28 Oct 2012

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While assets take the biggest hit post-divorce for both women and men, it is women who suffer the most in terms of income in the immediate aftermath of a break-up.

The annual household income of divorced women decreased by an average of $10,000 in the first year after divorce but for men it increased by $7000.

The research by the Australian Institute of Family Studies, the Australian National University and University of Queensland used data from the Household, Income and Labour Dynamics in Australia Study involving nearly 7700 households and 14,000 people from 2001 to 2010.

Matthew Gray, a researcher from the ANU, said while divorcees could recover financially in terms of their income, it was harder in terms of their assets. "There are very big differences in assets between those who divorce and those who don't divorce and that gap widens.

"In terms of assets, both men and women have a very substantial negative effect and that effect persists for at least four to six years after divorce. That persists into later life, into retirement. In income terms, there is quite a substantial effect initially. Men do better in income post-divorce than women."

Six years after divorce, women's average household income was $3000 more than their pre-divorce income while men were earning $13,000 more.

Professor Gray said the research showed divorcees fare better financially if they settle down with a new partner.

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Frequently Asked Questions about this Article…

What does research say about the financial impact of divorce on assets?

Australian research found people who split up hold far fewer assets than those who remain married. On average, divorced people had about $180,000–$190,000 less in assets than non-divorced people, and that gap doubled to roughly $360,000–$390,000 six years after divorce.

How does divorce affect household income for men and women immediately after the split?

The study showed a clear short-term difference by gender: in the first year after divorce, the average annual household income for divorced women fell by about $10,000, while for men it actually rose by about $7,000.

Do incomes recover over time after divorce?

Yes, the research indicates partial income recovery. Six years after divorce, women’s average household income was about $3,000 higher than their pre-divorce level, while men were earning about $13,000 more than before the split. However, asset gaps remained large.

How long do the negative effects on assets last after divorce?

According to the researchers, the substantial negative effect on assets persists for at least four to six years after divorce and can continue into later life and retirement.

What data and sample did the researchers use to study the financial effects of divorce?

The analysis used data from the Household, Income and Labour Dynamics in Australia (HILDA) Study, covering nearly 7,700 households and about 14,000 people between 2001 and 2010. The research was conducted by the Australian Institute of Family Studies, the Australian National University and the University of Queensland.

Why do men appear to fare better financially in income after divorce?

The research documents that men generally experienced income increases after divorce while women experienced immediate income falls, but the article reports the statistical outcomes rather than definitive causes. The authors note men do better in income post-divorce, while both genders see substantial asset losses.

Does getting a new partner help divorcees financially?

Yes. Professor Matthew Gray from ANU notes the research shows divorcees tend to fare better financially if they settle down with a new partner, suggesting partnership status affects post-divorce financial outcomes.

What should everyday investors know about divorce and long-term savings?

The study highlights that divorce can lead to large and lasting reductions in assets that may affect long-term wealth and retirement. For everyday investors, the key point from the research is that while income can recover for some, asset shortfalls after divorce can persist for years and into retirement.