For most people, divorce is financially perilous — at least, that’s what nearly all the studies say.

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 hanging onto the family home doesn’t always guarantee financial stability.

A common scenario occurs where the woman – often still the primary caregiver for any children – keep the family home. However, they may lack the resources to keep up with mortgage payments, maintenance, rates, and provide for unexpected crises. Keeping the house isn’t automatically the best move for everyone, especially in the cases where there’s another major asset on the table.

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.

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 to financially assist their children.

The Australian Institute of Family Studies has analysed data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, which has collected information from thousands of Australian households every year since 2001.

The Institute’s Deputy Director, Dr Matthew Gray, said the paper found that divorce had lasting impacts on women’s income levels (income adjusted for changes in household size following divorce), and the degree of hardship they experienced.

“The study shows that divorce has a substantial negative impact on the incomes of women, and almost no impact on the incomes of men after adjusting for changes in household size”, Dr Gray said.

“While this has been established in other studies, our study looks beyond income levels, and over a seven year period compares divorced women not just to men but to other women, in order to get a better picture of the long term financial impacts of divorce.

“The findings paint a bleak picture of the financial cost of divorce to women and their children.

separation, divorce, property settlement, divorce lawyers brisbane“But what is also clear from the study is that there are several important factors that will reduce the likelihood of increased financial hardship and prosperity after divorce.

“For women, higher pre-divorce income, being in paid employment, control over financial decisions pre-divorce, and stability of income are important factors in mitigating the negative financial impact of divorce,” Dr Gray said.

In the year immediately after divorce, women’s income declined while men’s stayed the same (after adjusting for changes in household size). While women’s income recovers over time, compared to the incomes of non-divorced women, they are still significantly behind.

Four years after divorce, women experienced a 2.9% increase in income from pre-divorce levels compared to an increase of 12.3% for non-divorced women. For divorced men, income increased by 12.5%.

“This finding is quite profound for divorced women, who, four years after divorce, are just managing to catch up to their pre divorce income levels.”

The study then went on to ask people how they perceived their own prosperity.

“What stood out here is that divorced men were more likely than divorced women to say they were poor or very poor. This is despite the fact that divorced men had higher incomes than divorced women and were less likely to experience financial hardships,” Dr Gray said.

Two years after divorce, of the men earning at least $4,000 per year more than they had pre-divorce, 22% said they were worse off (compared to 14.3% for women).  For men in this category, 80% had no increase in the number of hardships experienced.

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