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Divorce and the new tax law could impact retirement savings

Retirement and financial planning during marriage looks different than it does for newly single Massachusetts residents. After a divorce, many people find themselves facing an uphill battle when it comes to their finances, let alone retirement. It may be possible to mitigate some of the damage a divorce can cause by taking the time to carefully consider the decisions made during the proceedings.

The sobering fact is that Massachusetts residents going through a divorce need to take numerous things into considering when it comes to budgeting for a post-divorce life. In addition to the costs of getting divorced, each party ends up with fewer assets and more expenses afterward. Moreover, other considerations could affect finances and the ability to save for retirement.

The new tax law could affect the ability of one party to retain ownership of the family home. It also affects alimony since the paying spouse will no longer be able to deduct it during tax time beginning Jan. 1, 2019. Only if a couple's divorce is finalized by Dec. 31 will that tax deduction remain for the paying party. Child tax credits may become a bargaining chip since personal exemptions are going away.

These are just some of the tax changes that could affect what becomes important during a divorce. Couples may need to better understand how the new tax laws would affect them post-divorce. The decisions each party makes regarding asset division and finances during a divorce have always made an impact on the future, but with the new tax laws, some of those decisions may need to change. It could make a difference in whether an individual can make up the retirement savings that probably got divided as part of the divorce.

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