When a couple in Illinois makes the decision to end their marriage, the process of dividing marital assets often creates a host of issues. While bank accounts, stock holdings and real estate are routinely divided by the local courts, many divorcees have questions about retirement accounts.
Is my retirement account my own property?
Since your retirement account only bears your name, you may assume that it is private property. Unfortunately, that is rarely the case. In most states, any assets earned, including those invested in a retirement account, are joint property, meaning that divorcees must split retirement accounts.
Can I take money out of my retirement account?
While different companies have different requirements for their retirement accounts, some rules remain the same across the board. For instance, you usually cannot take funds out of a retirement account before you are 59½ years of age without penalty. However, divorces are usually the one exception to that rule, which means you can usually access your funds without paying a penalty.
Does dividing retirement funds trigger a penalty?
One of the biggest motivating factors for leaving money in a retirement fund typically involves the threat of penalties or taxation. However, divorce is an exception to that rule. Retirement account holders may divide their account with their ex without triggering any penalties, including taxation.
With the increase in “gray divorce,” which is a divorce among people aged 50 and older, questions surrounding retirement accounts are more common than ever. While investors will likely have to split their retirement savings with their ex, they can rest in the fact that they can do so without penalty.