Gain and Loss: Marriage and Wealth Changes Over Time

Published: 2009


Family composition has changed dramatically over the past 25 years. Divorce rates increased and remarriage rates declined. While considerable research established a link between marriage and earnings, far less is empirically understood about the effect of marriage on wealth although wealth is an important measure for older individuals because it represents resources available for consumption in retirement. In this paper we employ eight waves of panel data from the Health and Retirement Study to study the relationship between wealth changes and marital status among individuals over age 50. This research advances understanding of the relationship by first, incorporating measures of current and lifetime earnings, mortality risk and other characteristics that vary by marital status into models of wealth change; second, measuring the magnitude of wealth loss and gain associated with divorce, widowing and remarriage and third, estimating wealth change before and after marital status change so the change in wealth change is not the result of individuals entering or leaving the household and other sources of unobserved differences are removed from estimates of the effect of marriage on wealth. Our results suggest no differences in wealth change over time among individuals that remain married, divorced, widowed, never married and partnered over 7 years. In the short-run there are substantial wealth changes associated with marital status changes. Divorce at older ages is costly, remarriage is wealth enhancing and people appear to change their savings in response to changes in marital status.

Key Findings

    • Married people over age 50 save more out of their lifetime earnings than remarried, divorced, widowed or partnered individuals.
    • Individuals who divorce experience a loss of wealth two to four years before the divorce and during the divorce, and they experience wealth recovery from increased savings after the divorce.
    • Changes in wealth at older ages are similar for married couples and single men who do not change marital status, but divorced and widowed women save less.
    • Divorced individuals who remarry accumulate wealth at higher rates than those who remain divorced.