New Jersey couples planning to start the divorce process may be worried about how the separation will affect their retirement planning. As most spouses understand, divorce can have immediate emotional and financial effects. However, many divorcees neglect to consider their retirement readiness.
A study from Boston College’s Center for Retirement Research found that 50 percent of American households risked not being able to maintain their standard of living after retirement. The risk for households with a divorce was 7 percent higher. During marriage, people share their income and expenses. After divorce, however, life becomes more expensive for both parties, which affects their retirement planning. While the divorce rate is no longer increasing in general, separations for married couples over age 50 have continued to grow. This population faces an even bigger challenge when it comes to retirement planning after a divorce.
However, there are ways to plan for retirement even after a divorce. For parents, one way involves deciding who will claim the kids in their taxes. It’s important to note that the child tax credit is becoming more valuable. Investments might be another good idea, particularly for people receiving alimony who might fall under low-income tax categories and enjoy a zero rate on investment capital gains. For them, getting some investment property might pay off better than keeping the family home.
Since there are a variety of ways to financially plan for post-divorce life, it is important to start considering all options before and during the process. One way people can do this is by consulting with a family law lawyer who can offer information about the state and local laws regarding divorce and division of assets.