Family & Safety

In a divorce, a judge will consider the spouses’ retirement accounts when dividing property. These accounts include:

• 401(k) and 403(b)
• Pensions
• Individual Retirement Accounts (IRA) and Roth IRA accounts

In Illinois, a judge will look at what the spouses contributed to the retirement account during the marriage. They will also consider what earnings accumulated during that time. These marital funds can be divided in a divorce.

However, the judge cannot divide up non-marital funds. This includes contributions and earnings that were made before the spouses were married or after a legal separation.
 

The judge will not necessarily divide retirement accounts in half between spouses. Instead, they will look at what is equitable and fair given the situation. The judge will also consider the after-tax value of the account, since the tax rules are different based on the type of retirement account. For some accounts, money is taxed before being deposited into the account, while in others, the money is taxed after withdrawal.

In some instances, the judge may “offset” an amount from the retirement account by giving the spouse something else instead, like property or money in a shared account.

Once a judge has determined how a retirement account will be divided, special retirement division orders may be required by the retirement plan administrator:

• Qualified Domestic Relations Orders (QDROs): these may be required to divide 401(k)’s, 403(b)s, and pensions
• Qualified Illinois Domestic Relations Orders (QILDROs): these may be required to divide pension and retirement accounts for Illinois governmental employees.

QDROs and QILDROs enable the transfer of money without early withdrawal penalties.

Note that individual retirement accounts (IRA) do not require QDROs in a divorce and are instead divided as part of the divorce judgment. Done correctly, taxes may be avoided in this process.
 

When withdrawing funds from a retirement account, there may be penalties when it is done too early for the particular type of account. There may also be tax consequences. 

While a QDRO or QILDRO may be used to avoid early withdrawal penalties, immediately using the funds from a retirement account may be taxed.

In a divorce, a judge can divide one spouse’s military retirement benefits as part of marital assets if certain conditions are met. A federal law, the Uniformed Services Former Spouses Protection Act (USFSPA), 10 USC 1408, dictates how the pension can be divided. Learn more about the USFSPA.

Yes. An ex-spouse who is at least 62 years old, was married for at least ten years, and is currently unmarried may be eligible for spousal retirement benefits from Social Security. The amount the ex-spouse receives does not affect the amount the working spouse receives. Learn more about Social Security benefits for divorced spouses.

While Social Security benefits themselves cannot be divided by a judge in a divorce case, they can be considered when dividing up the spouses’ other property and assets.

Yes, a judge can order that each spouse keep their own retirement accounts as long as as it’s equitable and fair.
 

More information about the division of retirement accounts in a divorce can be found at the Illinois Marriage and Dissolution of Marriage Act, 750 ILCS 5/503.

Dividing retirement accounts may be complicated, depending on the type of retirement account and contributions. It can be important to consider early withdrawal penalties or tax consequences in deciding how the money is divided. Qualified Domestic Relations Orders (QDROs) or Qualified Illinois Domestic Relations Orders (QILDROs) can also be difficult to develop or complete. It is recommended that a lawyer help you if possible.

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