The authors write that in Massachusetts, the court financial statement form that judges rely on to determine alimony does not include itemized savings unless the party benefits from an employer-sponsored savings plan. (Metro Creative Services)
As we prepare to welcome another new year, many resolutions are being made. The laundry list often includes financial goals – saving money, spending more wisely, creating a budget and living by it. All admirable goals as long as you are not a dependent in Massachusetts.
The Massachusetts Supreme Court is currently deciding whether a divorcing 53-year-old mother, who supported her spouse's career during their long-term marriage while assuming primary responsibility for the family home and six children, can receive a child support amount beyond her Basic expenses (e.g. mortgage, utilities, groceries) so she can save for emergencies and future needs such as retirement.
Although Financial Planning 101 is about maintaining an emergency fund and saving for retirement, Divorce 101 in Massachusetts is not. The court's financial disclosure form, which all parties to a divorce must complete and which judges rely on when determining alimony, does not include itemized savings unless the party is benefiting from an employer-sponsored savings plan. This means that the savings are only recognized for the party working outside the home.
Caregivers say they are not advised to list savings as maintenance needs on the form; Rather, they are advised to “use it or lose it.” In other words, there is concern that savings in a divorce or post-divorce lawsuit against a caregiver could be used to reduce support.
The system is backwards. Saving – not spending – should be encouraged, not discouraged. It is a deeply rooted public policy that individuals should save for future needs and retirement. Think of all the government programs that encourage us to save (401ks, IRAs, 529s, etc.).
It is even more critical in cases where women limited their careers to take on the caring role of home and family. While this decision allows the other parent to further develop their career and pursue an increasing compensation trajectory, the caretaker mother's financial future is negatively impacted for life. It cuts her lifetime income, reduces the amount accumulated in a 401(k) plan and suspends Social Security contributions. This leaves her with a retirement savings gap compared to the parent who continued to work outside the home.
Data shows that women have less financial security for retirement compared to men:
Women's median 401(k) account balance was 65% lower than men's in 2022.
As of December 31, 2021, the average Social Security benefit for men was $1,838.08. For women, the average was $1,483.75 – or 20% less than for men.
For divorced women, the average Social Security payment was $875, less than half that of men.
Compared to men, women have, on average, around 30% less money saved by the time they retire.
The lifelong economic loss for nursing mothers is not insignificant. For example, a woman who earned $30,253 in 2014 (the median salary of younger full-time and year-round workers) who takes five years off at age 26 to provide care would earn $467,000 over the course of her career -Dollars, reducing their lifetime income by 19%.
This earnings deficit is exacerbated by the gender pay gap. In 2022, American women earned a total of 82 cents for every dollar men earned. The wage difference for employees aged 55 and over is higher at 77.8 cents. It is much more difficult for older women to recover from the economic consequences of divorce than for men. After a “gray divorce,” 27% of women live below federal poverty guidelines, compared to 14% of men.
In particular, parenthood plays a significant role in the gender pay gap. Lifelong research by Harvard professor Dr. Claudia Goldin, winner of the 2023 Nobel Prize in Economic Sciences, show that most of the earnings gap today exists between men and women in the same profession (and is not due to differences in education or career choice). that it mostly occurs after the birth of the first child. Furthermore, the gender pay gap does not appear to be due to a decrease in mothers' income, but rather an increase in fathers' income. For men, having children and having a wife to care for them means they earn more.
The majority of state courts dealing with this issue have ruled that savings maintenance is permissible. By legitimizing saving as a necessity, Massachusetts courts would promote a strong public policy of saving while allowing caregivers who set aside their future earning and saving potential to assume the family caregiving role that they may also save.
Lori Johnson and Margie Palladino are executive directors of the Mass Family Advocacy Coalition (MFAC), a women-founded nonprofit organization in Massachusetts dedicated to improving the family justice system for all users and their children.
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