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DuPage County retirement asset division lawyerGetting a divorce involves dealing with many different types of legal and financial concerns. While you may be primarily focused on matters such as the custody of your children or the ownership of your property, you will need to understand how your divorce will affect your financial future. If you have begun saving for retirement, understanding what will happen to these savings will be crucial for ensuring that you can maintain financial stability later in life. An experienced divorce attorney can help you determine how to divide retirement accounts and pension benefits with your spouse.

Division of Retirement Plans and Pensions

During your divorce, you and your spouse will need to divide all of your marital property. This includes most of the assets that you acquired, either together or separately, during your marriage, as well as your marital debts. While Illinois law does not require assets to be divided equally between the two of you, it does state that your property should be divided in a fair and equitable manner. 

Either you or your spouse may own one or more retirement accounts, such as 401(k)s or IRAs, and these accounts may contain funds that you have deposited or had withheld from your income, as well as contributions from your employer matching a percentage of the amount you have saved. All funds contributed to these accounts during your marriage will typically be considered marital property, and during divorce, they can be split between you and your spouse, or you may make other arrangements, such as one spouse keeping the majority of a retirement account’s funds and the other spouse maintaining ownership of the family home.

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Four Factors That Help Determine How to Divide Retirement Plans During DivorceFiguring out how to divide retirement benefits can complicate the division of property during your divorce. As with any marital properties, you must determine their value and how they fit into the equitable distribution of property. Will you divide the benefits between each other, or will you keep your own benefits? How much of your retirement benefits should your spouse receive? There are several factors that can help you answer these questions about your retirement plan:

  1. Type of Plan: There are generally two types of retirement plans that people receive through their work. Defined benefit plans, such as pensions, give employees a certain amount of benefits upon retirement, based on factors such as salary and years of service. Defined contribution plans, such as a 401(k), are based on employee contributions to the plan, which may also be supplemented by employer contributions. It can be more difficult to determine the current value of a pension than of a 401(k).
  2. Marriage Duration: Valuing a retirement plan as marital property is not as simple as figuring out its total current value. Only the amount that your retirement benefits increased in value during your marriage is marital property. Thus, the duration of your marriage will determine how much of your retirement plan is included in your marital property. Courts may also consider the duration of the marriage when deciding how equitable the division should be. The longer the marriage, the more equitable the division is likely to be.
  3. Individual Plans: When debating how to divide your retirement benefits, you should consider whether your spouse has their own benefits to support themselves in retirement and whether those benefits would allow them to maintain a reasonable standard of living. If your spouse has a retirement plan of similar value to yours, it may be simpler for each of you to keep your own retirement plans. If your retirement plan is more lucrative, you will likely be expected to share a portion of it.
  4. Planned Use: Spouses must determine when and how they will receive each other’s retirement benefits. You could plan to receive your share of the retirement benefits upon your retirement, delaying the payments until the time you need them. You could immediately receive your share of the retirement benefits without an early withdrawal fee. However, you would pay taxes on the money you withdrew unless you roll it over into your own retirement plan.

Contact a Naperville, Illinois, Divorce Lawyer

Dividing a retirement plan during your divorce is important for supporting yourself during the later years of your life. A DuPage County divorce attorney at Calabrese Associates, P.C., can assess the value of your retirement plan and negotiate an equitable distribution. To schedule a consultation, call 630-393-3111.

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Divorce Requires Adjusting Your Retirement PlanDivorce can upend your carefully made plans for your future, including your retirement. If you are approaching retirement age, you may have already figured out:

  • How much money you will need to support yourself and your spouse during retirement;
  • What lifestyle you will be able to live; and
  • How much you need to contribute to your retirement accounts in order to reach your goal.

However, your retirement plan assumed that you would be married. Having a spouse allows you to pool your retirement money together and share in your expenses. As a single retiree, you may have less financial resources to work with. There are a couple of ways that divorce can drain your retirement accounts.

Marital Property

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