When you and your spouse have made the difficult decision to end your marriage in Illinois, you will then embark upon the process of understanding the many aspects of your life this decision will touch. While some amount of loss whether it be of hopes and dreams or of actual assets is unfortunately part of the process, there may be ways to limit some of the losses you experience.
As explained by the United States Department of Labor, the use of a qualified domestic relations order may help you keep some of your precious retirement savings. Normally if you choose to take money out of your 401K before you meet retirement criteria, you might expect to pay very high penalties for the early withdrawal. You might also find that the money you receive is then subject to income tax. If you simply took money out of your 401K and paid it to your former spouse, even if your divorce decree indicates the split, you might be in the same situation. This would result in you losing a lot more money than you need to.
With a QDRO in place, your former spouse can receive the money from your 401K directly. This allows you to avoid the early withdrawal fees and the income tax altogether. Your partner may avoid the taxes if they reinvest the money into another retirement account.
If you would like to learn more about how to reduce some of the financial losses that you may incur during a property division settlement, please feel free to visit the retirement splitting page of our Illinois family law website.