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29% of the four million baby boomers are divorced, one third of them reported suffering a financial hardship in the past twelve months, compared to just 10% of married persons.
The emotional and financial costs of divorce are painful for anyone. But for Australia's baby boomer generation, with the first wave hitting retirement age this year, the financial cost of earlier divorce will hit hardest as they reach old age. It will also have a dramatic knock-on effect to Generation X and the Australian taxpayer. The forecast comes from a study conducted by the Australian Institute of Family Studies, which compared the financial wellbeing of divorced baby boomers to their never-divorced counterparts. More than four million baby boomers were born in Australia between 1946-1961. Of these, about 29 per cent were now divorced, according to the Australian Bureau of Statistics. The study, based on findings from the annual Household, Income and Labour Dynamics in Australia survey, involved men and women aged 55 to 74. It found that only 40.9 per cent of men who had been divorced owned their home outright compared to 74.7 per cent of married and never-divorced men.
Divorced men own 30000 dollars in personal assets than their married counterparts. The stark financial forecast for baby boomers could be softened however if they were able to summon the courage to remarry, the study said. If a man were to remarry, his chances of owning his own home outright increased from 40.9 per cent to 57.8 per cent, the study found. These figures were similar for women. About 30 per cent of men and 50 per cent of women will remarry, Dr Gray said.
The most frightening financial indicator for baby boomers was reported financial hardship, which involved being unable to afford to pay rent, utility bills or having to go without meals. One quarter of divorced, single men, and one third of divorced, single women reported suffering a financial hardship in the past 12 months, compared to just 10.1 per cent of married, never divorced men, and 8.1 per cent of married, never divorced women.
"So there will definitely be less inheritance for [the next generation]."Divorced singles are also far more likely to rely on a government pension… which will affect all Australian taxpayers". The most obvious solution to these problems was to encourage baby boomers to work beyond retirement age, Dr Gray said. Australia's current social security system would make life even more difficult for the already struggling divorced baby boomers as time progressed. Divorced boomers will either purchase another house alone and go into retirement in debt, or have to rent something more expensive than they can afford because they are just over the threshold for public housing. Another factor affecting the wealth of baby boomers came from studying inheritance patterns across the country. Boomers choose to spend their saving on themselves during retirement.
Mr Flint said the only way to combat an influx of baby boomers draining the pension system in coming years was to change the pre-requisites for public housing for this group, or to hope the next generation was wealthy enough to support their parents in old age.
The Canberra Times, "Pension pain for divorced boomers", 02/04/07
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