It has been widely reported in Ohio and around the country that many people are financially unprepared for retirement, but figures from the Center for Retirement Research reveal that divorced individuals are in an even more precarious position. The CRR developed a retirement risk index in 2006 to find out how many households will be able to maintain their standards of living during retirement, and they discovered that the risk factor for divorced spouses was 7 percent higher than the population as a whole.
Experts say that this is due to the financial adjustments that divorced spouses must make. Married couples are able to share household expenses while they save for retirement, but divorced individuals must often meet these obligations from a single paycheck. Catching up on their retirement savings can be especially difficult for people who divorce later in life, which is concerning because the divorce rate among persons aged 50 or older has more than doubled since 1990.
Changes to the nation’s tax laws that are due to go into effect in 2019 could also make life more difficult for divorcing individuals who hope to rely on spousal support to make ends meet. People who make alimony payments usually pay higher rates of income tax, and they may negotiate far more earnestly when the provisions of the Tax Cuts and Jobs Act are implemented, and spousal support is no longer deductible. The law also reduces the deductibility of property taxes, which could influence decisions about selling or remaining in the family home.
Divorcing spouses often focus on their immediate goals during property division and spousal support negotiations, but experienced family law attorneys could urge them to also consider their long-term needs. Lawyers may also suggest that older couples consider the impact that the timing of their divorce could have on their future Social Security benefits.