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Mitigating the financial impact of a divorce

Texas residents and others who get divorced later in life may significantly alter their path to retirement. However, it might be possible to minimize the financial impact of a divorce with careful planning before a marriage ends. The first step is to create a budget that reflects the true cost of living as a single person. A budget should include the cost of maintaining a household on one income as well as the cost of legal and other fees associated with the divorce itself.

It is also a good idea to account for the creation of an emergency fund when creating a financial plan. Getting a job can make it easier to both pay bills and obtain affordable health insurance. Those who are 65 or older when they get divorced might qualify for Medicare or other government programs. Individuals are encouraged to open an IRA in their own name to make saving for retirement easier.

This is because they could be entitled to a portion of a spouse's account as part of the divorce settlement. By putting the money directly into an IRA, it may be possible to avoid paying income taxes on the amount received. Furthermore, funds kept in a retirement account will continue to compound tax-free until the account owner begins to make withdrawals.

Retirement accounts may be among many items that are divided in a high asset divorce. The settlement may be negotiated by the parties either before or after the divorce process begins. If a couple has a prenuptial or postnuptial agreement, its terms may decide how property is allocated. It might also determine if either person is entitled to alimony or other financial resources. These resources may help an individual maintain a reasonable standard of living on his or her own.

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