Texas military spouses who are planning to divorce have a long list of items to consider. Among those considerations is how to approach division of retirement benefits. It may be tempting to prioritize other issues over retirement matters, but doing so can put some spouses at risk of serious financial issues, especially in light of upcoming tax law changes that go into effect at the beginning of 2019.
Spouses who divorce in 2019 will no longer have the ability to claim alimony payments as tax deductions. Those who receive alimony will no longer be able to claim those payments as earned income. While that means there’s no tax obligation for spousal support payments, a spouse who isn’t working will not be able to take advantage of retirement investments like an IRA or Roth account, as those can only be funded with earned income.
That’s why it is so important to make wise choices in regard to dividing assets in a military divorce. For younger spouses who have plenty of time to expand their skills and education and thrive in the workplace, these issues are less pressing. But for spouses nearing retirement age with no retirement savings of their own and little time left to fund a new account with an employer, different choices have to be made.
Very often, negotiating a fair division of retirement benefits is a great place to begin, but it isn’t the entire package. Texas spouses should also think carefully about which other assets to pursue, and how those assets align with their long term financial goals. Working with a divorce attorney skilled in military divorce is a good way to move toward a settlement that is fair and advantageous to both parties.