As you step into this next phase, don’t overlook long-term planning. Divorce often requires dividing retirement assets like 401(k)s, pensions, and IRAs. If applicable, a Qualified Domestic Relations Order (QDRO) is necessary to divide these accounts without tax penalties.
If you are eligible to collect Social Security, it is important to understand how divorce may impact your benefits. David Stolz, CPA/PFS, explains, “Social Security benefits may be available to a divorced spouse if the marriage lasted at least 10 years.” That benefit can be especially important for older adults nearing retirement.
Taxes can also get complicated. After divorce, you’ll likely change your filing status and may lose deductions or credits you previously qualified for. Benefits like the child tax credit are typically awarded to the custodial parent. You’ll also want to understand how alimony or property transfers may affect your taxable income.
Insurance is another area that needs your attention. If you were previously on your spouse’s health plan, you will need to find separate coverage. Courts may require one spouse to maintain life insurance to secure ongoing child support or alimony payments.