If you're getting divorced when you're closing in on your retirement, your financial future may be the main focus of the divorce. Your children already moved out of the house, so you don't have to worry about custody issues. You already paid off your home and other major debts, so other aspects of property division may appear very simple. But you have spent the last few decades planning for retirement, and you want to know exactly what impact the divorce is going to have on that plan.
It could be significant. Your retirement plan may count as a marital asset, meaning you have to divide it with your ex.
For instance, maybe your company is going to give you a pension when you retire. It pays out $5,000 per month. This takes away the stress often related with ending those bi-weekly paychecks. Without much in the way of expenses, you know you can live off of the payments.
However, your spouse also planned to live off of that pension. They have not worked in years. They have no retirement savings of their own. What are they supposed to do after the divorce?
If the pension plan does count as a marital asset, meaning you earned it while you were married, then you may have to divide it with your spouse. You can make them an alternate payee through the use of a Qualified Domestic Relations Order. The court order determines exactly how your spouse gets paid, what percentage they get and things of this nature.
Every case is different, so make sure you look into the specifics of your situation carefully. However, for the sake of explaining how this process works, let's assume that your spouse has a right to 50% of the pension that you earned during the marriage.
That may be 50% of the entire pension. If you started the job after you got married and earned the entire pension during your marriage, your spouse may then get a full 50%, which is $2,500 in the above example.
It may be much less, though, depending on when you got married. Say that you took 30 years to earn that pension, but you and your spouse only got married after 15 years at your job. Your spouse can then claim only the portion earned in that 15 years, which is already 50% of the total pension. They can then ask for 50% of that 50%, bringing them down to 25% of the total. You get the other 75%. Again, using the above example, this would give you $3,750 per month and your spouse $1,250 per month.
It is critical to understand that no two cases are exactly the same. This example helps you understand what obligations you may have, but it is critical that you consider the specifics of your case and exactly what legal steps you need to take in Illinois.