Ending a marriage creates the need to sit down and rethink one's entire financial plan. Divorce will reshape the financial landscape for virtually all Georgia spouses, and it is important to create a post-divorce budget that will address both short-term and long-term needs. Understanding the role that alimony plays in post-divorce finances is an important component of that process.
To begin, alimony will have an impact on each spouse's tax obligations in the years to come. The spouse who is expected to make alimony payments can deduct those payments on his or her tax return. On the other hand, the spouse who receives payments must claim those funds as income.
Another important consideration involves retirement savings for a spouse receiving alimony. Because alimony is considered income, the recipient is entitled to set aside up to $5,500 per year toward retirement savings. For spouses who are over the age of 50, that amount increases to $6,500 for each year.
Individuals who receive spousal support should also make a plan for how those funds might be best used. In some cases, alimony will be needed to cover basic living expenses. For spouses who have more choice in how to use their spousal support, there are a number of investment options that offer solid returns.
As with all financial matters, advance planning is key to a successful outcome. Regardless of whether an individual is making or receiving alimony payments, it is important to factor those payments into one's post-divorce budget strategy. Doing so can help avoid any nasty surprises, especially in those first few years following a Georgia divorce.
Source: CNBC, "Financial planning for divorce? It's not just for women", Beth Lynch, Oct. 2, 2017