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Many retire into poverty, but it doesn't have to be that way
By Sandra Block, USA TODAY
In Victorian times, polite society shunned divorced
women, often forcing them to spend their
later years alone. Today, some divorced women suffer a different
fate.
Among low-income retirees, they are the poorest of the poor.
According to federal statistics, 22% of divorced
female retirees live in poverty vs.
18% of widows and 20% of
women who never married. And the situation could get much worse.
The number of retirement-age women will increase by 84% in the next 20
years to 9.6 million, according to U.S.
Census figures. Meanwhile, the divorce rate remains stuck at about 48%.
"In terms of living standards, it's not the widows
who are the worst off," says Martha Ozawa,
a social policy professor at Washington University in St. Louis. "It's
the women who enter retirement
either separated or divorced."
Poorly constructed divorce settlements and short-term
thinking —
trying to hang onto a dream home that took two incomes to support, for
instance —
can cripple women's finances. Divorced women also often get shut out of
their ex's pension benefits.
As a result, many divorced women are forced to move
in with their children, rely on loans
from relatives, or seek other sources of outside income. Lee Ann
Luttrell, 53, of Las Vegas rented
out rooms in her home after her 27-year marriage ended in 1996.
Even in the best of circumstances, many divorced
women are forced to work long after the
traditional retirement age. Jennifer Solomon, 54, co-author of a study
on retirement income and a
professor at Winthrop University in Rock Hill, S.C., contributes
regularly to her retirement savings
plan. But Solomon, who got divorced at 38 after 20 years of marriage,
didn't start contributing to
the plan until she was 44. She received no pension benefits in her
divorce settlement.
"My Social Security statement has all these zero
years," she says. During most of her marriage,
she stayed home with her children, so for those years, she has no
earnings that count toward Social
Security benefits. Solomon expects to work well into her 70s.
Studies show that divorced men fare far worse in
retirement than men who remain married. But divorced
women are further hindered by uneven work histories — the average
working-age woman spends 11.5 years out of the workforce, mostly caring
for children — and lower salaries.
Shoddy settlements
Poorly constructed divorce settlements are another
key reason for the problem. They can be devastating,
especially for elderly women who need to rely on pension rights as an
ex-spouse.
Divorce lawyers can seek a court order that typically
gives part of the husband's retirement benefits to his
former spouse and children. But the rules governing such orders are
complicated and the execution frequently flawed.
The rise in stock options, profit-sharing and other non-traditional
compensation further complicates reaching an equitable settlement.
Luttrell thought her 1996 divorce settlement included
a portion of her former husband's pension.
Not long after, she learned the order was invalid.
She receives $750 a month in alimony, but under the
10-year term of the divorce settlement, payments
will stop in six years. Unable to work for health reasons, Luttrell
spends most of her time fighting for a
portion of her former husband's pension. She is representing herself
because she can't afford a lawyer,
but getting the courts to listen is hard, she says. "Once your case is
messed up, nobody wants to help you."
Similarly, neglecting to insist on a survivor's
benefit — which ensures benefits continue after the ex-husband's
death — can come back to haunt divorced women, because women often live
longer than men.
Pauline Orr, 69, of Venice, Fla., thought her future
was secure when her 40-year marriage ended in 1994.
But when her ex-husband died in 1995, her income dwindled from about
$2,000 a month to $200 a month
because her divorce settlement included no provision to continue
pension payments from his job as a federal employee.
Faced with the loss of her home, Orr wrote to federal
and state legislators seeking a review and sued
her lawyer for malpractice. She won a $400,000 judgment against her
lawyer, who later filed for bankruptcy.
She has yet to collect.
Finally, after her story was chronicled in the Sarasota
Herald-Tribune, the U.S. Office of Personal
Management, which administers federal employee pensions, reviewed her
case. In March, it agreed to restore
Orr's benefits, making them retroactive to 1995.
But Orr's victory is unusual, women's advocates say.
Persuading a pension plan administrator to restore
benefits is a long, expensive process, and many divorced elderly women
can't afford to hire a lawyer.
Short-term choices
While it's easy to blame heartless husbands, women
often make themselves vulnerable, financial planners say.
Too often, they give up a portion of their ex-husband's pension or
other retirement savings, such as a 401(k) plan,
in exchange for the house or other immediately accessible assets.
It's a choice that can cost them a secure retirement.
Dee Lee, a financial planner in Harvard, Mass., says
she often advises women to sell the
house and split the proceeds in exchange for a portion of the
ex-husband's retirement benefits.
When a client insists on keeping the house for the sake of her
children, she says, "I tell them, if it's that
important, sign a contract with your children, because they're going to
have to take care of you in your old age."
Lee says the booming housing market has exacerbated
the problem. Rising home prices and a strong
economy have led many couples to invest much of their joint income in
their homes.
When the marriage dissolves, women often sell within a few years
because they can't afford to
maintain the house on one income.
Women who have won retirement benefits say finding a good lawyer is key to success.
Suzanne Pozzo, 54, of Los Angeles feared she would
lose everything when her 32-year marriage
ended three years ago. She married her high-school sweetheart and spent
most of her marriage taking care
of their children, entertaining and doing volunteer work while her
husband launched a successful business.
He argued that since he had built the business, she had no right to a
share, Pozzo says.
Pozzo eventually won half the value of the business
and was able to keep her Brentwood home.
But the fight was long and costly. She spent months interviewing
attorneys before she found one she trusted.
She also hired a forensic accountant to figure out the value of her
former husband's business.
Too often, women jeopardize their future security
because they want to put the pain behind them,
Pozzo says. "You've got to hire people around you that you feel
confident are representing you," she says.
"You just can't give up."
Possible solutions
Recognizing the role Social Security plays in many
retirees' lives, presidential candidates
George W. Bush and Al Gore have proposed reforms to the system. Bush
wants to give workers the option of
investing part of their payroll contributions in personal retirement
accounts. Gore would supplement
Social Security with voluntary, tax-free savings accounts that would be
matched by the government.
Both candidates say their proposals would ensure that
Social Security is solvent for future retirees.
But retirement experts say shoring up Social Security won't save
divorced, elderly women from poverty —
pegged at $7,990 a year for individuals 65 and up. According to the
Social Security Administration, the
average retired woman receives just $8,376 a year in Social Security
benefits. Many divorced women earn much less.
Instead, divorced women must construct what
policymakers call the three-legged stool of retirement: S
ocial Security, personal savings and company retirement plans:
Women should learn about their rights to their spouse's
retirement savings before the divorce, says
Ann Moss, a Washington, D.C., attorney and author of Your Pension
Rights at Divorce. "Attorneys
don't always think of things like survivor's benefits."
Take advantage of spousal Social Security benefits. A woman
who was married for at least 10 years
before her divorce may qualify for benefits based on her spouse's work
history, rather than her own.
In many cases, that results in larger payments.
Working women should take greater advantage of 401(k) plans
and similar programs. Unlike traditional
pensions, women don't have to stay at the same job for years to
benefit from those plans. A woman who
leaves her job to care for her children can roll her savings into an
individual retirement account.
With compounding, even small contributions to
retirement savings can go a long way, especially if women
start saving while they're young, says Cindy Hounsell, executive
director of the Women's Institute for a Secure Retirement.
Sometimes, that means putting long-term retirement
security ahead of children's short-term desires. Instead,
she says, "put it in an individual retirement
account."
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