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How Can an Illinois Divorce Affect My Retirement?

Posted on in Divorce

Kane County divorce attorney asset division

Getting a divorce can have significant financial implications not only for your immediate future but also in the long term. In particular, it may have an impact on your retirement plans, especially if you are divorcing later in life. Statistics show that more and more older couples are getting divorced these days, referred to as “gray divorces.” It is important to be aware of the potential effects of ending your marriage at this stage and to consider options that allow you to keep your retirement goals within reach as much as possible.

Divorce and Your Golden Years

Often called the “Golden Years,” retirement can be an enjoyable time for active adults who are done working. However, divorce brings a number of changes that can affect your retirement plans, including:

  • The division of retirement assets: Although you may expect that a retirement account in your name is your personal property, under Illinois law, it can be considered marital property if contributions were made during your marriage. This means that your retirement assets can be included in the equitable division of property, and you may be left with less savings than you expected to have.

  • The transition to a single income: Married couples often consider both of their incomes when planning for retirement, but after a divorce, you will likely have to adjust your plan to reflect the fact that you only have your own income to draw from. This can be especially difficult if you relied on your spouse’s income throughout your marriage.

  • The addition of unexpected expenses: Divorce can involve substantial expenses that you likely did not account for in your retirement plan, like legal costs, spousal support, and possibly the cost of a new home.

Protecting Your Retirement

With the assistance of an attorney, you can take steps to minimize the negative effects of divorce on your retirement plans. If your spouse is open to it, one approach that can be helpful is pursuing an uncontested divorce, in which the two of you work cooperatively toward an agreement on all terms. With this option, you can negotiate for a division of property that allows each of you to retain the retirement accounts in your own names, or for spousal support that provides you with regular income at a time when it is difficult to earn an income on your own.

If you do have to divide a retirement account during your divorce, it is important that you do so correctly. Usually, funds can be transferred from one spouse’s IRA to the other’s without penalties or tax consequences, but dividing an employer-sponsored account like a 401(k) requires you to obtain a Qualified Domestic Relations Order (QDRO). A QDRO is a legal order that splits a retirement plan or pension plan by recognizing each spouse’s ownership interests in this type of asset.

Contact a Kane County Divorce Attorney

At the Law Offices of Benedict Schwarz, II PC, we can advise and represent you throughout the divorce process and help you achieve an outcome that leaves a comfortable retirement within reach. Contact our qualified St. Charles divorce lawyer today at 847-428-7725 to schedule a free consultation.

 

Sources:

https://www.forbes.com/sites/frawleypollock/2019/11/02/how-divorce-can-impact-your-retirement-plans/?sh=4dbf20d82166

https://www.prudential.com/financial-education/divorce-impact-retirement

 

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