How Are Retirement Accounts Divided in a Divorce?

 Posted on April 03, 2025 in Divorce

When a marriage ends, dividing up the life you built together is never easy, especially when it comes to your financial future. Often built over decades of hard work, retirement accounts can be one of the most valuable assets in a divorce. In Illinois, these accounts are divided by specific state laws that can be tricky to navigate on your own. Understanding how the process works is key to making informed decisions and protecting what you have earned. An Illinois divorce lawyer can help you make sense of the rules and ensure your retirement savings are handled fairly under state law.

What Types of Retirement Accounts Can Be Divided?

Retirement savings can come in several forms, all of which may be considered marital property if acquired during the marriage. These include:

• 401(k) plans

• Traditional and Roth IRAs

• Pensions

• 403(b) and 457(b) plans

• Thrift Savings Plans (TSPs)

• Profit-sharing or deferred compensation plans

Any growth in these accounts during the marriage is generally subject to division in a divorce, even if the account is in only one spouse’s name.

Is a Retirement Account Always Considered Marital Property?

According to the Illinois Marriage and Dissolution of Marriage Act, retirement savings earned before the marriage are considered non-marital property and usually remain with the original account holder. However, any contributions made and any growth in value during the marriage are typically classified as marital property and are subject to equitable division.

How Does Illinois Divide Retirement Accounts?

Illinois follows the principle of equitable distribution, which means that property is divided fairly, rather than an automatic equal split. When it comes to retirement accounts, a court will consider factors such as:

• How long the couple was married

• Each spouse’s financial and non-financial contributions to the marital estate

• The economic situation of each spouse

• Any prenuptial or postnuptial agreements that outline how assets should be divided

The court might also use a Qualified Domestic Relations Order (QDRO) to divide certain retirement accounts.

What Is a Qualified Domestic Relations Order (QDRO)?

A QDRO is a legal order used to split certain retirement accounts during a divorce. It tells the retirement plan to give part of one spouse’s account to the other. Without a QDRO, the plan cannot make this kind of transfer. A QDRO also helps avoid early withdrawal penalties and extra taxes. 

Not every type of retirement account needs a QDRO. For example, IRAs follow different rules, but most employer-sponsored plans require a QDRO.

Can Spouses Agree on How to Divide Retirement Accounts?

Divorcing spouses can reach a private agreement on how to divide their retirement assets, as long as it complies with Illinois law. This agreement can be outlined in the divorce settlement and will carry the same legal weight as a court-ordered division once it is approved. However, it is important that both parties understand the long-term impact of any decision, including future tax implications and potential changes in the value of the accounts.

Contact a Kane County, IL Divorce Attorney

If you are going through a divorce and have concerns about how retirement accounts will be divided, it is essential to seek legal guidance. A St. Charles, IL retirement asset division lawyer at Goostree Law Group can help you make informed decisions and protect your finances. To learn more about how we can help you understand your options and work toward a resolution that supports your financial goals, call 630-584-4800 for a free consultation.