Preparing for retirement is a lifelong process that requires careful planning and thoughtful goal setting. Most married couples work on their retirement plan together, with many expecting to rely on savings that both spouses have accumulated throughout their lives and careers. However, when your marriage ends in divorce, those retirement plans can be turned upside down, and you and your spouse will likely need to adapt your retirement goals for your new life circumstances. In some cases, this means delaying your retirement date, but there may be other options as well.
What becomes of your retirement savings depends on whether the funds qualify as marital or non-marital assets. If you have a retirement account that was funded entirely before your marriage, it will be considered non-marital property, and you will likely be able to hold onto the entire amount. If you have contributed to an account both before and during your marriage, the pre-marriage contributions may also qualify as non-marital property, though it is important to maintain detailed records to clarify this non-marital portion.
Any contributions to a retirement account during your marriage will likely qualify as marital property, even if you and your spouse each have accounts in your own name. This applies to a variety of accounts including IRAs, pensions, 401(k)s, and more. These accounts will be considered in the division of marital property in your divorce, and if an account needs to be split, it is important to take action to minimize tax consequences and early withdrawal penalties. For example, you should obtain approval for a transfer incident to divorce in order to divide an IRA, and a Qualified Domestic Relations Order (QDRO) in order to divide employer-sponsored accounts like a 401(k).
Though dividing retirement accounts correctly can help to minimize your losses, you will most likely find that your retirement funds decrease somewhat in your divorce, requiring you to adapt your retirement plans. Some options for doing so include:
At Mevorah & Giglio Law Offices, we can help you make and execute a plan to protect your retirement savings as much as possible during the divorce process so that your goals remain in sight after your marriage has ended. Contact us today at 630-932-9100 for a free consultation with our experienced Lombard, IL property division attorneys.
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