Super and divorce: a personal finance issue
The end of a married or de facto relationship means that a former couple's assets - including the family home, superannuation savings and non-super investments - may be split in a property settlement.
Solely from a retirement-planning perspective, not only may retirement savings be split but each person will have to pay for separate accommodation and other living costs. In turn, this is likely to make saving for retirement much tougher.
As the ASFA retirement standard, published by the Association of Superannuation Funds of Australia (ASFA) reminds us each quarter, it costs markedly more to finance the retirement of two single people than a couple.
Just two of the numerous personal finance challenges facing an estranged couple are how to effectively divide the marital assets, including super, and then how to individually try to rebuild separate retirement savings.
Following the recent federal Budget, there has been discussion in the media about the challenge for separated couples of trying to rebuild super savings within the existing and proposed concessional and non-concessional (after-tax) contribution caps. This is likely to receive more coverage in coming months, particularly as all of the details of the Budget proposals are yet to be released.
The latest-available divorce statistics from the Australian Bureau of Statistics (ABS) based on marriages and divorces in 2014 suggest that 38 per cent of marriages may end in divorce. (Significantly, the divorce figures do not include de facto relationships.)
These statistics also show that the rate of what is sometimes called "silver" or "grey" divorce. Such divorces commonly involve couples who have been married for 30 years or so before divorcing when close to retirement or in early retirement.
The divorce rate, on one hand, becomes markedly lower as couples age. Nevertheless, ABS records indicate that the divorce rate among those aged over 55 has increased by 25 per cent for men and 47 per cent for women during the 20 years to 2014, yet seems to have largely plateaued in recent years.
Older couples would typically have only limited opportunities, if any, to rebuild their retirement savings - depending upon their circumstances.
Perhaps takeaway messages here include the importance of gaining specialised legal and financial planning advice following the breakdown of a relationship.
Further reading: Smart Investing recently looked at the other side of marital relations and money, discussing how for married and de facto couples - particularly those whose relationships last - taking a joint approach to personal finances and investments can be highly rewarding. As with all things in personal finance, much depends on the circumstances.
By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia
09 June 2016
Latest Newsletters
Hot Issues
- SMSF assets reach record levels amid share market rally
- Many Australians have a fear of running out
- How to get into the retirement comfort zone
- NALE bill passed by parliament
- Compliance focus impacts wind-ups
- LRBA interest rates increase for 2025
- Income-free areas set to increase from 1 July
- Most Spoken Languages in the World
- Middle-to-higher incomes boosting SMSF growth
- Investment and economic outlook, May 2024
- Transitioning into retirement: What you should know
- Plan now to take advantage of stage 3 tax cuts
- Deeming freeze a win for Age Pensioners
- Downsizer contributions can be time critical
- The superannuation changes from 1 July
- The Deadliest pandemics in History
- Winners & Losers
- Budget breakdown – Federal Government Analysis
- Federal Budget 2024
- Getting to a higher level of financial literacy in Australia
- What is the future of advice and how far off is superannuation 2.0?
- Investment and economic outlook, April 2024
- Australia’s debt service ratio ‘extraordinary’: CBA
- Connecting an adviser with your children
- ACCC scam report
- The Shortest-reigning Monarchs in History
- ATO warns trustees about increasing crypto scams
- Aged care report goes to the heart of Australia’s tax debate
- Removed super no longer protected from creditors: court
- ATO investigating 16.5k SMSFs over valuation compliance
Article archive
- April - June 2024
- January - March 2024
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
April - June 2016 archive
- Making investing a family affair
- Super and divorce: a personal finance issue
- Market Update - May 2016
- ASIC flags SMSF investors in scam risk
- Older, greyer and still working
- Working and contributing to super past 65
- The pitfalls of part-year pensions
- Replenishing SMSF memberships
- Budget will hit 15% of SMSFs
- The insidious side of low interest rates
- Market Update - April 2016
- Budget 2016-17
- Do investment principles stand test of time?
- Estate Planning - early inheritance
- US economy will bend, not break
- A detailed look at the ATO’s new LRBA guidance
- Defying life's blueprint
- ATO continuing lodgement crackdown
- Another twist on the gender savings gap
- Market Update – March 2016
- Going solo
- Use our online budgeting tools to help plan your future.
- Age Pension means-test prevents rational decision-making
- Changing times for super collectables
- Preservation Age Rule
- Why investing for retirement isn't just about super