When a marriage comes to an end in Texas, it can mean short-term financial issues for newly single individuals adjusting to shifts in income and expenses. A report by the Center for Retirement Research suggests that divorce can also impact readiness for retirement. Changes pertaining to how alimony payments are taxed could present additional challenges for divorced couples.
According to the CRR's National Retirement Risk Index, half of all households in the United States may not be able to maintain their standards of living after retirement. This figure is nearly 10 percent higher for households going through a divorce. Nationally, divorce rates are down except among couples 50 and older. Unfortunately, seniors may find it especially difficult to compensate for financial losses prior to retirement.
Retirement readiness may also be affected by alimony, which is normally paid by the higher-earning ex. As per the Tax Cut and Jobs Act, couples ending a marriage in 2019 and beyond will no longer be allowed to deduct such payments, and recipients won't have to claim it as income. In some situations, this could make it difficult for the higher-earning spouse to afford to make payments. However, the lower-earning ex may benefit from being in a lower tax bracket. The new child tax credit could further increase the importance of determining who may claim a kid for tax purposes.
Because of the many legal and financial issues related to divorce, it can be helpful to obtain guidance from a family law attorney. Having access to legal input could also make it easier to take advantage of available Social Security benefits, divide assets in a way that minimizes tax burdens and negotiate arrangements with custody and spousal or child support payments.