Divorce and Retirement Savings

 Posted on April 23, 2015 in DIvision of Property

Divorcing at any time in your life is hard, but if you are over 50, it can pose its own set of considerations. If you have saved any amount of money for retirement in a savings account, IRA, 401(k), or other savings plan, you will have to navigate how to split up your retirement savings. For some couples, this means they will have significantly less than they thought and may not be able to retire when they had planned. Property division in an Illinois divorce is not a straightforward half and half split down the middle. Property and assets, like your retirement savings plans are divided in the most equitable way for each spouse.

Things to Consider for Older Divorcing Couples

With the number of divorces growing among couples aged fifty or older, questions about retirement savings plans, also called illiquid assets, are becoming more commonplace in divorce proceedings. There are several factors older divorcing couples will need to consider and discuss in their divorce. Some questions to consider are:

• How will the illiquid assets be divided;
• Will the other spouse still receive survivor benefits; and
• How will social security benefits be divided?

In addition to dividing the illiquid assets, couples will have to consider the taxation on the assets after the divorce. Depending on the type of illiquid asset, the couple may have to pay taxes on the transfer of the assets after the divorce. Couples will need to consider the best course of division of retirement savings plans so they are able to keep their savings maximized instead of having it largely taxed.

Saving Your Retirement Savings

After the divorce is finalized, the funds become the sole property of each party. While the division process may seem straight forward, couples may become confused or frustrated when having to figure out if the division is for the amount currently in the account or if it will be for the entire savings account when it matures.