As we prepare to greet another New Year, resolution-making abounds. Often included in the laundry list are financial goals – save money, spend more wisely, create a budget and live by it.  All admirable goals, as long as you are not a recipient of alimony in Massachusetts.

The Massachusetts Supreme Judicial Court is currently deciding whether a divorcing 53-year-old  mother, who during the long-term marriage supported her spouse’s career while managing  primary responsibility for the family’s home and six children, may receive an amount of alimony over and above her basic expenses (such as mortgage, utilities, food) so that she could save for emergencies and future needs such as retirement.

Though it’s Financial Planning 101 to maintain an emergency fund and save for retirement, it’s not so in Divorce 101 in Massachusetts. The court’s Financial Statement form, which all divorcing parties are required to complete and judges rely on to determine alimony, does not  include a line item for savings unless the party has the benefit of an employer-supported savings plan. This means that savings is recognized for only the party working outside the home.

Caregivers report they are not counseled to add savings as an alimony need on the form; rather, they are counseled to “use it or lose it.” In other words, fear pervades that saving money is used against a caregiver in a divorce or post-divorce action to reduce alimony.

The system is backward. Saving – not spending – should be encouraged, not discouraged. It is a deeply entrenched 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 curtailed their careers to accept the caregiving role of the home and family. While this decision allows the other parent to continue building his career and continue on an upward compensation trajectory, the caregiving mother’s financial  future is impacted negatively for life. She decreases her lifetime earnings, reduces the amount accumulated in any 401(k) plan, and pauses contributions to Social Security. This leaves her with a retirement savings gap compared to the parent that continued working outside the home.

The data demonstrates that women have less financial security for retirement compared to men:

The median 401(k) account balance for women was 65% lower than for men in 2022.

As of Dec. 31, 2021, the average Social Security payment for men was $1,838.08.  For women, the average was $1,483.75 — or 20% less than that of men.

For divorced women, the average Social Security payment was $875, or less than half that  of men.

Women on average have saved about 30% less money by the time they retire compared to men.

The lifetime economic loss to caregiving mothers is not insignificant. For example, a woman earning $30,253 in 2014 (the median salary for younger full-time, full-year workers) who takes five years off at age 26 for caregiving would lose $467,000 over her working career, reducing  her lifetime earnings by 19%.

This earnings deficit is exacerbated by the gender wage gap. In 2022, American women in total earned 82 cents for every dollar earned by men. The wage gap for women workers age 55 or older is higher at 77.8 cents. For older women, the economic consequences of divorce are much harder to recover from than men. After a “gray divorce,” 27% of women live below the federal poverty guidelines, compared with 14% of men.

Notably, parenthood plays a significant role in the gender wage gap. Lifetime research by Harvard professor Dr. Claudia Goldin, the 2023 winner of the Nobel Prize in Economics, shows that most of the earnings difference today is between men and women in the same occupation (not because of differences in education or occupation choices), and that it largely arises after the  birth of the first child. Moreover, the gender wage gap does not seem to be driven by a decrease in mothers’ earnings, but rather driven by an increase in the earnings of fathers. For men, having children and a wife who is the caregiver is related to their earnings boost.

The overwhelming number of state courts considering this issue have ruled that savings alimony is allowed. By legitimizing savings as a need, Massachusetts courts would promote the strong public policy of savings, while assuring caregivers who put aside their future earning and savings potential to assume the caregiving role in the family that they may be allowed to save too.

Lori Johnson and Margie Palladino are executive directors of Mass Family Advocacy Coalition (MFAC), a Massachusetts non-profit organization founded by women dedicated to improving the family law system for all users and their children.