Divorce drops a person's wealth by 77 percent, study finds

A new nationwide study provides some of the best evidence to date of the devastating financial toll divorce can wreak on a person's wealth.

The study of about 9,000 people found that divorce reduces a person's wealth by about three-quarters (77 percent) compared to that of a single person, while being married almost doubles comparative wealth (93 percent). And people who get divorced see their wealth begin to drop long before the decree becomes final.

"Divorce causes a decrease in wealth that is larger than just splitting a couple's assets in half," said Jay Zagorsky, author of the study and a research scientist at Ohio State University 's Center for Human Resource Research.

By the same token, married people see an increase in wealth that is more than just adding the assets of two single people.

"If you really want to increase your wealth, get married and stay married. On the other hand, divorce can devastate your wealth," Zagorsky said.

Contrary to popular belief, the results showed that the wealth status of divorced women wasn't significantly worse than that of divorced men, in terms of real money.

The findings appear in the current issue of the Journal of Sociology.

The study used data involving 9,055 people who participated in the National Longitudinal Survey of Youth, which is funded primarily by the U.S. Bureau of Labor Statistics. The NLSY is a nationally representative survey of people nationwide conducted by Ohio State 's Center for Human Resource Research.

The same people are interviewed repeatedly over time, giving Zagorsky the opportunity to see how wealth changes as a result of marriage and divorce. Zagorsky used data from 13 NLSY surveys conducted between 1985 and 2000. All the respondents were between 21 and 28 years old in 1985.

People who remained single had a steady, but slow growth in wealth from less than $2,000 at the start of the surveys up to an average of about $11,000 after 15 years, according to the study.

People who got married and stayed married showed a sharp increase in wealth accumulation after marriage, growing to an average of about $43,000 by the 10th year of marriage.

In fact, married people increased their wealth about 4 percent each year just as a result of being married, with all other factors held constant, Zagorsky said.

For people who married and then divorced, there was a slow build-up of wealth during the early years of marriage and then a steady decline beginning about four years before divorce. Total wealth bottomed out the year prior to divorce, to an average of about $3,500.

"Many of these people may have separated before the divorce became official, which would help explain why wealth starts falling so early," Zagorsky said. "Some people may also be working less and not trying as hard to build wealth as they have marriage troubles. Divorce is often a long and messy process, and you can see this in the four-year decline in wealth."

Wealth begins climbing again in the year of the divorce, but not by much. "Even a decade after divorce, the median wealth stays below $10,000," he said.

The results also cast doubt on the common assumption that divorce is significantly harder financially on women than on men.

After divorce, the typical man held 2.5 times the amount of wealth held by the typical woman. While this seems large in percentage terms, the difference in absolute dollars is relatively small about $5,100.

The data in this study can't say why marriage is so helpful in building wealth, and why divorce so devastating, Zagorsky said. But sociological research offers some potential clues: Married people can benefit because two people can live more cheaply than they could separately. In addition, because two spouses can share household responsibilities, they can each produce more than if they were single.

Divorced people have a variety of costs associated with the divorce, which increases how much they spend and decreases how much they can save, he said.

"We can't tell from these data the reasons why divorced people have so much less wealth than those who are married, but the results are clear, Zagorsky said.

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Contact: Jay Zagorsky, Zagorsky.1@osu.edu

Written by Jeff Grabmeier, 614-292-8457; Grabmeier.1@osu.edu


Last reviewed: By John M. Grohol, Psy.D. on 21 Feb 2009
    Published on PsychCentral.com. All rights reserved.

 

 

 
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