Could I Lose My Retirement Savings in a Divorce?

 Posted on October 12,2023 in Property Division

Divorce rates among individuals over 50 are on the rise, with those aged 65 and older seeing a threefold increase in divorce since 1990. Amidst the emotional strain of any divorce, financial uncertainties loom large in what is recently being called a gray divorce. These couples often have substantial retirement assets and what you once considered exclusively yours may need to be reevaluated. After a divorce, the last thing you want is to discover that you did not receive the complete retirement benefits you were entitled to. You need an Illinois retirement assets divorce attorney to assist you with the legal aspects.

Will I Be Penalized for Early Withdrawals During a Divorce?

Under Illinois law, in a marriage, retirement savings are considered marital assets, regardless of the account holder's name. Whether you have a pension, 401(k), IRA, or any other retirement plan, it could be divided during a divorce if it is considered a marital asset.

If the account existed before the marriage, only the growth in its value is typically divided during a divorce, unless a valid prenuptial or postnuptial agreement states otherwise.

When splitting these assets, it is essential to consider the tax implications of early withdrawal. 

There are two primary methods:

• Keeping the retirement assets in the account holder's name and compensating the other spouse with different marital assets like real estate or business interests. With proper asset valuation, a fair division is achievable.
•  Dividing the funds within the retirement account between spouses. Transferring assets from one retirement account to another in the other spouse's name can occur without penalties if the correct procedures are followed. For certain retirement accounts, like 401(k)s and 403(b)s, a qualified domestic relations order (QDRO) may be needed. We have experience handling QDROs and various retirement assets in divorce cases.

 How Does Divorce Impact Pension Benefits?

In Illinois, if a pension was acquired during the marriage, the spouse who is not the pension owner may have a claim to a portion of it when it's disbursed during retirement. The share they receive is determined by factors like the duration of the marriage while the pension-earning spouse worked for the employer offering the pension and any agreements reached during negotiations between the spouses. These arrangements are crucial in defining the division of pension benefits in divorce cases.

Schedule a Free Consultation with a St. Charles, IL Retirement Assets Divorce Lawyer

At Shaw Sanders, P.C. we understand that your retirement savings could be one of your most valuable assets. You need a skilled Kane County retirement assets divorce attorney who will help protect your rights and your hard-earned money during a divorce. Call 630-584-5550 for a free consultation.