Planning for Retirement: How Divorce Can Impact Your Retirement Plans
By: Gordon & Perlut, LLC
Planning for retirement after a divorce in the Chicago area can be complicated. You should know that, for many Chicago area residents, a divorce will result in the distribution of most if not all your retirement accounts. To be sure, Illinois law requires courts to follow an equitable distribution model, which means any marital assets are distributed between the spouses in a manner that is equitable to both parties based on a variety of factors. Marital property includes most assets acquired after the date of marriage, unless they are expressly excluded through a prenuptial agreement or they were acquired by gift or inheritance. When couples are nearing the age of retirement and have been married for many years, most the retirement accounts will be classified as marital property and will be subject to distribution.
If you are currently planning for retirement — whether you are 10 years away from retirement or have already passed the minimum retirement age of 65 — there are some things you should know about how divorce is likely to impact your planning.
You May Need to Work Longer Than You Anticipated
If a portion of your retirement accounts are distributed to your spouse in the divorce, you may need to work for a longer period than you were initially anticipating. For example, if 40 percent of your 401(k) was distributed to your spouse, you may need to plan on working enough years to replenish the account before retiring. For many older adults who get divorced, this means working beyond 65.
You Might Need to Go Back to Work
If you recently retired and are now in the early stages of the divorce process, you may need to go back to work. While it is not a reality many people in “gray divorce” cases like to face, the division of marital assets, including retirement accounts, can mean there is simply not enough money to live in retirement without additional income.
A Marital Settlement Might Allow You to Retain Your Entire Retirement Account Balances
In some cases, if your retirement accounts are of utmost importance to you, it may be possible to negotiate a marital settlement agreement in which you retain all of the funds in your retirement accounts but give up other property in exchange. This way, you may be able to continue planning for retirement as you were before the divorce, but with fewer assets beyond your retirement money.
Contact a Divorce Lawyer About Retirement Planning
If you are anticipating you or your spouse will file for divorce, there are steps you can take to prepare for retirement now that can help once your divorce is finalized. One of our experienced Chicago divorce attorneys can also speak with you about options for negotiating a property settlement in which you are able to retain your retirement assets after the divorce, assuming you are willing to let your spouse retain ownership of other valuable property from the marriage. Contact Gordon & Perlut, LLC today to get started on your case.