Economic conditions lead to increase in divorce

 Posted on February 21, 2014 in High Asset Divorce

For years, researchers have studied the financial impact of divorce and the effect that the economy has on divorce rates. The financial downturn of 2008 certainly gave researchers a lot of new data to work with.

Many people might assume that when economic times are bad, divorce rates skyrocket as frustrated couples struggle to make ends meet, and even affluent, high-asset couples begin to feel the strain. According to the data, however, the reverse is true.

According to the U.S. Census Bureau, American divorces took a nosedive in the aftermath of the 2008 recession. They reached a 40-year low during the recession and did not begin to rise again until after the economy began to improve.

Researchers say this is because divorcing couples are often concerned about their ability to manage their finances with only one income. This leads many couples to resist divorce during difficult economic times and simply wait until the economy improves. Once spouses can be reasonably assured that they will be able to maintain their lifestyle post-divorce, they are far more willing to separate.

This assumption seems to be backed up by more recent data. Divorce rates increased as the economy began to improve. The effects of this increase could be seen in many sectors. More women began to appear in the workforce as the divorce rate rose and over 5 million new households were established — a figure bolstered in part by single households dividing into two.

The economic aspect of divorce is an important one, and spouses who are in the process should look at their finances and their future expenses very carefully when they are going through the division of assets process. This is true for both low-income families and high-asset couples; careful financial planning is key to emerging from divorce in the best possible financial position.

Source: Bloomberg, "Worsening U.S. Divorce Rate Points to Improving Economy" Steve Matthews, Feb. 18, 2014