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Divorce compounds retirement risk

Divorced Americans are at greater risk of not being able to maintain
their standard of living in retirement, according to new research
conducted by the Center for Retirement Research at Boston College with
the support of Prudential
Financial, Inc. (NYSE:
PRU).

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“A fundamental shift needs to take place in the way we think about retirement. Instead of solely thinking about accumulating savings, people also need to consider a plan for protecting and generating retirement income.” – Kent Sluyter, president, Prudential Annuities (Photo: Business Wire)

The research study, which compares the risk divorced households face
using the center’s National Retirement Risk Index (NRRI), reveals
divorced households have a 7 percentage point greater risk of not having
adequate retirement income than households that have not experienced
divorce. Among all households, exactly half are at risk of not having
adequate retirement income.

“Millions of American households are at risk for not having adequate
retirement income, and the challenge is even more acute among
divorcees,” said Kent Sluyter, president of Prudential Annuities. “These
are sobering numbers that highlight a fundamental shift that needs to
take place in the way we think about retirement. Instead of solely
thinking about accumulating savings, people also need to consider a plan
for protecting and generating retirement income.”

For example, Sluyter said, annuities can offer a layer of protection
because they can come with guaranteed income and other features to help
generate income to supplement other retirement savings. And for people
who are divorced or are contemplating divorce, annuities can be
particularly important, particularly for the spouse with lower income.

The study’s findings show that on top of the normal retirement worries,
divorced couples are dealing with legal fees, splitting assets and
increased living expenses, and they must find ways of making up for that
loss.

Sluyter noted that whatever course of action people take, whether
divorced or not, access to financial planning and advice is key.

“Prudential, along with 23 other companies, recently established the
Alliance for Lifetime Income with the goal of promoting greater
understanding of how annuities can protect retirement income and help
grow retirement savings so consumers can make informed decisions about
the options that are right for them,” Sluyter said.

James Mahaney, a vice president in Prudential’s Strategic Initiatives
unit, author of a companion paper to the NRRI study, agreed. Mahaney
says that the Tax Reform and Jobs Act will likely make it much harder
for divorced spouses to secure their financial futures, but notes that
new planning opportunities have arisen as well. He recommends people who
are divorcing or contemplating divorce consider some key financial
issues such as:

“With so many factors to consider, it is more important than ever for
divorcing couples to assess their financial plans and find opportunities
to stretch their wealth and think about future income streams as they
prepare for retirement,” Mahaney said. “This is especially important for
women, who not only tend to be the lower earner, but also receive less
alimony under the new tax law.”

For more information, read the National
Retirement Risk Index research and Prudential’s perspective, “Planning
for Retirement: The Impact of Divorce.” You can also access
calculators and other tools to assess your retirement readiness on prudential.com.

About Prudential Financial

Prudential Financial, Inc. (NYSE: PRU), a financial services leader, has
operations in the United States, Asia, Europe and Latin America.
Prudential’s diverse and talented employees are committed to helping
individual and institutional customers grow and protect their wealth
through a variety of products and services, including life insurance,
annuities, retirement-related services, mutual funds and investment
management. In the U.S., Prudential’s iconic Rock symbol has stood for
strength, stability, expertise and innovation for more than a century.
For more information, please visit www.news.prudential.com.

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