Divorce can have a significant impact on an older person’s ability to retire. Those who end their marriage after the last day of 2018 may also have to contend with changes to the tax treatment of alimony payments. Starting on Jan. 1, 2019, Arizona residents and others who make alimony payments will no longer get a tax deduction for doing so. Anyone who receives an alimony payment can no longer claim it as income.
In addition to alimony payments, battles may break out about how to split retirement accounts. This can be important to prepare for because those receiving alimony can’t use the payments to fund an IRA. Couples may also get into disputes over what to do with the marital home. According to one divorce attorney, it may be best for whoever gets the house to sell it. The proceeds can then be used to fund a retirement account.
When determining how valuable an existing 401k or IRA is, it is important consider the impact of capital gains and other taxes. A Roth account is generally worth more than a traditional account because there is no need to pay taxes on it. This is because the taxes were paid in the year that the money was put into the Roth account.
The end of a marriage may be a different experience for those over the age of 50. They tend to be more concerned about their ability to pay bills and save for the future. An attorney may be able to negotiate a settlement that allows an individual to retain assets like a retirement account or home. Spousal support may also be part of a settlement. This may make it easier for a person to exit a marriage with his or her financial security intact.