630-584-4800

630-584-4800

St. Charles Divorce Near Retirement Attorneys

Kane County Attorney Explains How to Protect Your Retirement in a Late-Life Divorce

When divorce happens very close to your planned retirement age, you will want a financially savvy lawyer on your side to maximize your security in retirement.

At Goostree Law Group, we know how stressful the process of planning for your financial future can be. In a late-life divorce, one of our top concerns will be to negotiate a settlement that provides the best possible retirement for you.

The first step is to make sure all of your assets are identified and assigned correct values. We must then negotiate an equitable division of your marital property. Illinois law does not require this to be a 50/50 split. Rather, there are at least a dozen different factors to be considered, and the weight to be given to each factor varies from case to case. Our attorneys are skilled at analyzing every factor that we can argue in your favor in both the division of property and the award of maintenance if any.

At Goostree Law Group, each of our attorneys has practiced divorce and family law for an average of 15 years. We are skilled in negotiating divorce settlements that satisfy our clients' needs, as evidenced by our many testimonials.

Do I Get to Keep My 401(k) and IRA in a Divorce?

One of the most common questions we get asked involves the difference between a marital asset and a non-marital asset. Assets that you owned prior to marriage are your non-marital property, and you keep 100 percent of those assets in the divorce. Assets acquired with income earned during the marriage are considered marital property that must be divided equitably between the spouses.

Many people have a retirement account that they built up prior to their marriage and continued adding to throughout the marriage, such as a 401(k) or IRA. We will need to trace the history of the account to determine what percentage of the current funds should be designated as marital vs. non-marital. Only the marital portion of the account would be included in the marital estate to be divided.

Should I Give My Spouse a Retirement Account or Other Assets?

When considering how to divide your marital estate, it is crucial to consider the tax implications. This is especially important with regard to tax-advantaged retirement accounts like a Roth IRA.

For example, when you retire and start to withdraw money from a tax-deferred IRA or 401(k) account, you will pay ordinary federal income tax on those withdrawals. However, when you withdraw money from a Roth IRA, no federal income tax will be owed on withdrawals made after age 59½, as long as the account has been open for at least five years. Thus, $100,000 in a Roth IRA is actually worth more than $100,000 in those other types of accounts because of the tax benefit.

There are several ways to handle the division of retirement benefits:

  • If both spouses worked throughout the marriage, you might agree that it is equitable for each spouse to keep their own separate retirement benefits.
  • If one spouse sacrificed career opportunities to support the other's career advancement, the total value of their retirement accounts should perhaps be split 50/50. The spouse with the larger account value could be ordered to transfer some of their funds into the other spouse's IRA. There is no tax penalty for doing this, as it is considered an asset transfer incident to divorce.
  • If a spouse wants to keep their retirement account intact, other assets of equivalent value could be granted to the other spouse instead, such as a greater share of the proceeds from the sale of their marital home or a greater share of non-retirement savings.
  • If you need cash to pay off debts, you might agree to liquidate a retirement account and pay the penalties, dividing the remaining cash equitably.

Pensions. In order to divide a pension plan, your attorney must draft a document known as a qualified domestic relations order, or QDRO, and submit it to the plan administrator. The QDRO will specify what percentage of the monthly pension payment should go to each spouse. Then, when the participating spouse retires, each spouse will separately receive their share of the pension payment each month. Because pension plans usually have an annual cost-of-living adjustment, and payments will last for the person's lifetime, regardless of how long they live, it is critical to come up with an accurate pension valuation to ensure a fair division of both the pension and the marital estate overall.

Social Security retirement benefits are handled differently than employer-specific pension plans. IF you were married for at least 10 years prior to your divorce, and you do not remarry, you can choose to claim benefits based on your own lifetime earnings or based on your ex's. If you claim based on your own earnings, you will receive 100 percent of the monthly payment for which you qualify. If you claim based on your ex's earnings, you will receive only half of the monthly payment for which your ex qualifies. Claiming benefits based on your spouse's record does not affect their benefits; your ex would still receive 100 percent of their payment. In cases where one spouse did not earn much income during the marriage, half of their spouse's Social Security benefit may be far greater than their own full Social Security payment.

Contact Our St. Charles Gray Divorce Lawyers for Retirement Benefits

The attorneys of Goostree Law Group will advocate strongly for your interests in matters of divorce, family law, and criminal defense. We serve clients in the Kane County communities of St. Charles, Campton Hills, Elgin, Geneva, Batavia, North Aurora, Elburn, Kaneville, and LaFox. Contact us in our St. Charles office at 630-584-4800 for a free consultation.

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