About half of those in Kentucky and throughout the country may not be able to maintain their current lifestyle in retirement. However, that number is about 7 points higher for those who have gone through a divorce. This was determined by looking at the National Retirement Risk Index created by the Center for Retirement Research. The ability to retire could be put in jeopardy because of higher costs incurred when a person is single compared to when a person is married.
It can also be hard to overcome the loss of assets that can occur in a divorce. Losing assets can be especially harmful to those 50 and older who go through a gray divorce. Between 1990 and 2010, the rate of divorce in this age group increased while it stayed steady among other age groups. A change in the way alimony is treated for tax purposes could also have a negative impact on a divorcing individual’s finances.
If a divorce is finalized after 2018, alimony payments will not count as a tax write-off for the person making the payment. The money that a person saved on a tax return each year could then allow that individual to provide more money to a former spouse. With that tax treatment going away until at least 2025, it could complicate a person’s finances after a divorce.
The end of a marriage can take an emotional and financial toll on an individual. It may be beneficial to have an attorney as part of an overall divorce team that includes an accountant and a mental health professional. This may provide the emotional support, legal knowledge and financial insight needed to create a favorable divorce settlement. In some cases, divorce settlements might be reached through mediation as opposed to litigation.