Texas residents who are planning to or in the midst of a divorce may be concerned with the hit their finances may take due. While it is true that for some people, divorce can result in financial complications, for others, there may be positive financial outcomes.
The end of a marriage provides a person with an opportunity to start fresh, including with his or her financial matters. Divorce can be the pathway to learning to make more practical budgets, focusing on savings and retirement, and cutting expenses by doing things such as downsizing one’s home. For someone who was in a marriage in which there were constant disagreements over finances and an ex-spouse’s spending habits, life post-divorce means he or she can take full control of his or her finances.
Investing and retirement
Another positive outcome of divorce may be the chance for a person to manage his or her own investment portfolio. Some studies suggest, for example, that women are more conservative in the way they manage their investment portfolios and that this can result in somewhat larger gains over time. Divorce also provides people more options when it comes to retirement, which may include:
- Penalty-free access to retirement accounts, although the money that is withdrawn must be rolled over into an IRA if someone wants to avoid paying taxes on it
- Access to spousal benefits before their ex-spouses claim the benefit as long as the marriages lasted at least 10 years and the ex-spouses have reached the age of 62
The kids can benefit as well
College-age children may also become eligible for a higher amount of financial aid when their parents divorce. The reason for this is because their Free Application for Federal Student Aid (FAFSA) is filed based on the custodial parent’s tax return, although alimony and child support payments must also be included.
Divorce does not have to mean financial devastation. It can offer some advantages. Planning for life post-divorce should include clear, realistic financial goals.