Divorce can devastate women's retirement savings. Here's how to rebuild

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Many people don't think their marriage will end in divorce. However, splitting up can significantly set retirement savings back, especially for women.

Divorced or separated women over the age of 65 had a median household income of $35,736 in 2016, trailing men in the same category who made nearly $38,000 annually, according to data from the Center for Retirement Research at Boston College. That lags married men and women over the age of 65, who in the same year had median household incomes of $67,404 and $64,524, respectively.

Women and men who had been widowed or never married also had less money to live on than their married counterparts, and women trailed men in every category.

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One major reason for this is the wage gap between men and women, according to Geoffrey Sanzenbacher, an associate professor of the practice of economics at Boston College and a fellow at the Center for Retirement Research. Women often take time away from work to raise children or care for other family members, which can mean they make less over time.

“That effects them forever, basically,” he said. In addition, divorced women are more likely to have children.

Of course, divorce also impacts men's finances, but usually less so than for women. Here's how women can start to rebuild their retirement savings after a divorce, according to experts.

Take stock of finances

During a divorce, assets accumulated during the marriage will be separated.

Following this process, it's important to women sure that appropriate changes have been made, such as canceling joint accounts, retitling assets in their name, updating account beneficiaries, reviewing insurance coverage and updating estate plans.

Then, women should look at their budget and rethink their current and future lifestyle, according to Linda Farinola, certified financial planner and president of PFG-Financial Planning and Management in Princeton, New Jersey. If they don't have enough to make ends meet and save for the retirement they want, they may need to make cuts now, such as selling a larger house to buy a smaller one.

While changing your budget might be painful, especially if you have children, it will help you in the long-term if you're able to save more, Farinola said.

“Sometimes you have to make choices that you don't necessarily like,” she said.

Another thing many women may need to consider after a divorce is their earning power, according to Shweta Lawande, a CFP and analyst at Francis Financial, a New York-based firm dedicated to serving women, couples and those experiencing divorce. Going back to work or looking for a higher-paying job could make a big difference in the long run.

“A 45-year-old woman who is able to increase her salary from $50,000 to $60,000 a year will bank an extra $210,000 by the time she retires at age 65,” she said. “If she were to invest this raise each month, the future value of her $10,000 increase could grow to nearly $420,000 assuming a portfolio return of 6% per year.”

Invest accordingly

Once you've readjusted your budget, make sure that you're putting enough money away to retire on time and with enough savings to cover your intended lifestyle.

The best way to make sure you're getting the most out of retirement saving is to do so in an investment account that will help your money grow over time. This includes an employer-sponsored 401(k) plan, which often comes with a match of funds, an individual retirement plan or even both.

Following a divorce, it's also a good idea to review and adjust the risk level in any retirement portfolio you already have. Taking on more risk may help you make up for some lost time, if you haven't been saving enough, while lowering the risk level in your portfolio will help protect your assets from loss.

Get professional help

A professional financial advisor or even a certified divorce financial analyst can help you sort through your money and plan for your new future.

“For women who weren't actively participating in their finances during marriage, it is important that they take the lead when it comes to their long-term financial planning and investing, either alone or with the help of financial advisors,” said Lawande.

A professional can help make sure you're thinking long-term and taking advantage of all the options available to save for retirement, including how to manage and draw on Social Security. For instance, some divorced spouses may be able to draw on their previous partner's benefit, meaning a larger monthly check.

Protect yourself now

For those who are not divorced or have been and are looking to get married again, the best thing they can do to protect themselves is to stay involved in financial decisions, experts said.

“Spouses who handled the majority of the finances during marriage have an advantage over the other spouse,” said Lawande. “Be aware of everything that is owned as a couple, including the value, location and tax implications of these assets.”

In addition, married couples should make sure that they are saving appropriately for retirement for both people, instead of saving only for one or counting on future earnings to put away more. In the event of a divorce, this means assets being split will put both parties in a better position.

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