How is a Retirement Account Split During an Illinois Divorce?

 Posted on January 28, 2026 in Division of Assets

While the division of retirement accounts during an Illinois divorce can be complex, it can also be a crucial part of the property division process. Some spouses in the middle of a contentious divorce may simply walk away from their share of the retirement account just to have the matter over and done with. Other spouses may not believe the retirement account is worth enough to go through the headaches of splitting it. However, many others cannot finance their later years without their retirement funds.

According to recent data from the Investment Company Institute, retirement assets make up 34 percent of household financial assets in the country. At Calabrese Associates, P.C., we know how valuable your retirement account may be, and how important it is to protect it from a messy division. Our DuPage County, IL divorce lawyers have over 40 years of combined experience, so we can effectively guide you through complex financial matters.

Will I Have to Split My Retirement Evenly With My Spouse?

Under the Illinois Marriage and Dissolution of Marriage Act, only the portion of a retirement account earned during the marriage is treated as marital property. That marital portion is divided fairly as part of the divorce. If spouses marry later in life, one or both may already have retirement savings. Contributions made before the marriage are usually considered separate, or non-marital, property. Those funds often remain with the spouse who earned them.

Illinois is an equitable distribution state, so the court will consider many different factors for a fair division. The division will depend on the length of the marriage, the future earning capacity of both spouses, whether there is a significant age difference between the spouses, and the amount of non-marital assets each spouse has. The split of marital retirement accounts can be changed if both parties come to their own agreement.

How Do Courts Determine the Marital Portion of a Retirement Account?

Illinois courts focus on timing when deciding what part of a retirement account is marital property. The key question is how much of the account was earned during the marriage.

Courts also look at growth. Even if a portion of the account started as non-marital, any increase in value during the marriage may be partly marital. This often depends on whether the growth came from market forces or from new contributions made with marital income. Clear records matter. Statements from the start of the marriage and from the date of divorce are often used to trace what belongs to whom.

Problems arise when records are missing or when accounts are mixed. If marital and non-marital funds were combined over time, it can be harder to separate them. In some cases, a court may treat more of the account as marital if tracing is not possible. This is why early review of retirement documents is important.

How Are Retirement Accounts Divided in 2026?

A QDRO (Qualified Domestic Relations Order) is used to divide a retirement account in a divorce proceeding. This order allows the transfer of a portion of one 401(k) account into a separate retirement account established by the other party. When a QDRO is implemented, the 10 percent penalty for early withdrawal is waived.

Before a QDRO takes effect, it must be approved by both the court and the retirement plan administrator. The administrator reviews the order to confirm it meets the plan’s rules and federal requirements. If the language is incorrect, revisions may be required, which can delay distribution.

There are some situations where a retirement account does not have to be split. In some divorces, spouses agree that one person will keep the full retirement account. In return, the other spouse may receive a larger share of other marital assets, such as cash or home equity.

In other cases, a premarital or post-marital agreement may control how the retirement account is handled. These agreements can specifically state that a retirement account will not be divided in a divorce. This sometimes happens when one spouse does not fully understand how valuable the retirement account is.

Lump Sum vs. Periodic Payments for Retirement Division

There are different ways to divide a retirement account in a divorce. One option is a lump sum. This means one spouse receives their share all at once, often through a rollover into a new retirement account. A lump sum can provide a clean break and avoid future contact between spouses. However, it may come with tax consequences if it is not handled correctly.

Another option is periodic payments. This is more common with pensions or other plans that pay out over time. Instead of receiving money right away, the receiving spouse gets a portion of each payment when benefits begin. This approach spreads payments out but requires ongoing coordination.

Each option has pros and cons. A lump sum offers certainty but may require careful valuation. Periodic payments can reflect the true value of the benefit but delay access to funds. The right choice depends on the type of retirement account, each spouse’s financial needs, and long-term planning goals.

What if One Spouse Cashes Out a 401(k) to Avoid Division?

A spouse who was planning a divorce could have quietly cashed in his or her retirement account and then stashed the money with the intent of keeping the entire amount. Cashing out a retirement account early can have serious tax implications. Hidden assets are almost always discovered. A spouse who tries to hide assets to avoid division could have sanctions issued against them, so it is never a good idea.  

It is also wise to remember that retirement accounts are designed to increase in value over time, so the future value of the retirement account is sometimes considered. However, courts often only consider the present value. An attorney should always be consulted before cashing out or dividing a retirement account.  

Contact a DuPage County, IL Property Division Lawyer

The division of retirement accounts is inherently complicated. With that in mind, it can be beneficial to have an experienced Naperville, IL asset division attorney working on your behalf. You may require financial experts to help determine your fair share of the retirement assets. Once that is accomplished, we will fight for your rights in court. Contact Calabrese Associates, P.C. today at 630-393-3111 to schedule a consultation.