Saving for retirement is always a race against time. You want to put as much as you possibly can aside while making use of income tax incentives so that you can enjoy a comfortable standard of living both now and during your retirement.
You may have plans to spend your golden years with your spouse, but now your budget will need to change because the two of you will soon divorce. What you have set aside to fund your retirement may be at least partially at risk of division in your divorce proceedings. How much of your divorce savings could you potentially lose in an Illinois divorce?
The timing of your deposits influences the division of the account
The longer you have funded the same retirement account, the more likely it is that you have some retirement savings from before your marriage. The amounts you contributed before you got married are likely your separate property that you will not need to divide.
The amounts contributed to the account during your marriage, including what your employer may have contributed, are subject to claims from your ex in divorce proceedings. Equitable distribution rules put most of the property and income the two of you shared during your marriage on the table for property division in the divorce.
If you signed a prenuptial agreement protecting your retirement savings as separate property, then you may not have to worry about sharing the funds with your spouse. Otherwise, they are likely subject to division.
Dividing the account doesn’t have to lead to penalties
If you make a withdrawal from certain kinds of retirement savings accounts before you actually retire, you will have to pay substantial penalties and taxes on those withdrawals. You don’t have to worry about taking those same financial losses in a divorce. A Qualified Domestic Relations Order (QDRO) allows you to effectively divide the account with your ex without needing to pay taxes or worry about penalties.
What about Social Security?
If you were the higher-earnings spouse or the sole breadwinner for your family, your ex may have the right to make a claim against your accrued Social Security retirement benefits. The good news for you is that any such claim will not diminish the benefits that you receive from the Social Security Administration when you retire.
When you understand the rules that apply to complex property division matters in Illinois divorces, you won’t have to worry so much about whether you can support yourself during your retirement. Exploring the rules for property division in Illinois divorces can help those preparing for court with their spouse.
