Illinois residents may not realize that retirement savings are among the assets which need to be divided after a divorce. The way these savings are split can differ depending on the type of retirement plan people have, and it is important to understand the different ways retirement savings can be divided.
As they prepare to divide their retirement savings, it is good for people to look into the laws about property division in Illinois. According to FindLaw, it is common for property to be divided equally between spouses. The length of a marriage and the amount that each spouse contributed to the retirement savings is usually considered. Additionally, a court might examine the economic situation of each spouse once the divorce is finalized and whether they will be able to contribute enough money to retirement savings in the future.
It is important for people to remember that different kinds of retirement accounts are taxed differently. Time Magazine says that after spouses divide their savings, one of them may realize that they have a different amount of money than they thought. This is because people usually pay their income tax before putting money into a Roth IRA, while they put money into a 401(k) before paying taxes. This means that once money has been removed from an account, the remaining amount may sometimes be smaller after taxes are taken out.
People are sometimes able to move their retirement funds without experiencing additional taxes. When people have individual retirement accounts, they can usually transfer their portion of the savings through a transfer incident. Additionally, people may use a Qualified Domestic Relations Order. This document demonstrates that both spouses have a right to the retirement assets and also ensures that neither spouse is taxed for removing assets.