Whatever the age, separation and divorce can be a stressful and painful experience. According to the Australian Institute of Family Studies, the divorce rate has been trending down in the 2000s. However, the proportion of couples divorcing who had been married for 20 years and longer has been increasing, with one age group 55-59 doubling over the last two decades. This rising trend is referred to as “grey divorce” or “silver splitters”, used to describe couples in their 50s and 60s calling it quits on their marriages. With more finding themselves going it alone into retirement, we explore the importance of superannuation as part of a divorce settlement.
In family law, the principles that apply in determining a division of assets for the over 50s are the same as those for other age groups. Whilst each factual scenario will be different, the court adopts the same approach and considers the asset pool, the contributions the parties have made to that asset pool, the ‘future needs’ factors that are outlined in the Family Law Act and whether the division is just and equitable.
The division of the family home is usually the most valuable asset and the point of most contention. An asset that is commonly overlooked by women is their share in the superannuation pool.
Whilst we have more women in the workforce than ever before, I still find that a woman’s ability to divorce and remain financially independent is more challenging for those separating in their 50’s and beyond. Superannuation is an asset which will be considered as part of any financial settlement and married couples can divide their superannuation. However, de facto couples in Western Australia are the only couples in Australia who are unable to divide superannuation following the breakdown of their relationship.
Mind the gap
Recent figures from the Australian Bureau of Statistics (ABS), found the average superannuation balance for men aged 55 to 64 was $332,700, and women $245,100. This falls short of the ideal amount $545,000, suggested by the Association of Superannuation Funds of Australia (ASFA), to support a comfortable lifestyle for a single person at retirement. Furthermore, for older women, a lifetime of reduced financial security due to the gender pay gap, interrupted employment and relationship breakdown, sees them being the most vulnerable household type in Australia, according to government data, and most likely to deplete superannuation funds to meet lifestyle expenses.
Withdrawing from superannuation to fund big ticket items such as a new car or holidays, however tempting, may not be the ideal option. Latest performance figures from Chant West saw superannuation funds recording an average return of 23.1 percent over the last 12 months and 10 percent over three years. With interest rates at its lowest level, consider alternative methods of funding rather than your superfund. Working with a qualified financial planner like one from the SWU Group to build out a plan, will set you on a course of financial certainty.
Review your super
When determining a divorce settlement, consider the long-term impact of dividing assets, in particular the need for financial support through superannuation funds. Seeking the advice of a financial professional such as one from the SWU Group will provide a clear view of your options and align it with your personal goals.
There are six areas to bear in mind when considering superannuation as part of a settlement. This includes the value of your superannuation compared to the ideal amount needed for retirement, the amount of insurance built in your super, the underlying investments and impact of Centrelink entitlements.
The need for retirement savings becomes more critical when divorced later in life. Women have less time to bridge the gap in building up the ideal amount for a comfortable retirement. This generation also tends to have undertaken more ‘traditional’ roles in the relationship, where the women have spent much of their lives out of the workforce to have children and take care of the household.
Research suggests that it takes on average five years to recover financially from a divorce, so make this time count. Start with creating a financial budget that you can stick to, then redirect any surplus funds in investing in you, whether that is updating existing skills or toping up your superannuation balance. The Australian Government has incentives for mature age women 55-64 to re-enter and participate in the workforce.
Finding the courage
Going it alone may seem daunting at first, but recent research found that women aged 50-65 are happier and more confident than women in their 20’s, and that women who have control over their finances are more independent and have the courage to go it alone. So if you are an older woman facing life on your own for the first time in many years, don’t discount the value of a lifetime of lived experience. Draw courage that you are more than capable! And if in doubt, the insight and guidance of a financial planning professional can go a long way to giving you comfort and assistance in developing a financial approach to help you make the most of your resources and maximise your enjoyment of single life!