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Divorced households may struggle during retirement

Going through a divorce can cast a long financial shadow, and a study released by the Center for Retirement Research reveals that the net worth of divorced households in Texas and around the country is about 30 percent lower than married households. The Boston College-based group also says that divorced spouses are 7 percent more likely to struggle financially during their retirement years. The study, which was published in June 2018, used figures from the Federal Reserve's latest Survey of Consumer Data.

Researchers from the National Regulatory Research Institute have also been looking into the impact that the end of a marriage has on retirement, and they found that more than half of the nation's divorced men and women lack the funds needed to enjoy their golden years in comfort. While spouses who divorce early in life may still have time to prepare financially for retirement, those who end their marriages in their 50s or 60s often face uncertain futures.

Changes to the tax code scheduled to go into effect in January 2019 could also influence retirement planning for divorced spouses. Under the current rules, 401(k) savings accounts are often left intact because spouses choose to take more generous spousal support awards. The loss of the alimony tax deduction will likely lead to more retirement accounts being divided and higher tax bills.

Entering property division negotiations can be a daunting experience for older spouses, and family law attorneys may discuss matters such as IRA and 401(k) accounts with them beforehand to ensure that they are prepared. Attorneys could also encourage spouses who are nearing their 10th wedding anniversary to consider temporarily postponing their divorces. This is because only divorced people who were married for 10 years or longer can receive Social Security benefits based on the contributions made by their former wives or husbands.

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