For many people, retirement represents decades of careful planning, disciplined saving, and the hope of financial security later in life. When a marriage ends, however, those carefully developed retirement plans often need to be completely reevaluated. Dividing one household into two can significantly affect retirement savings, future income, housing decisions, healthcare costs, and overall financial stability.
If you are considering divorce in Illinois, it is natural to worry about whether you will have enough money to retire comfortably. While divorce almost always affects long-term financial planning, the outcome depends on many factors, including the length of the marriage, each spouse’s earning capacity, the assets accumulated during the marriage, and how property is divided during the divorce.
Recent research continues to show that divorce generally reduces retirement wealth for both spouses because the same pool of assets must now support two separate households. At the same time, studies also demonstrate that thoughtful financial planning and strategic property division can help many divorced individuals maintain long-term financial security.
An experienced Chicago divorce attorney can help protect your financial interests while ensuring that retirement assets are divided fairly under Illinois law.
One of the most important financial realities of divorce is that it is generally more expensive to maintain two households than one.
During a marriage, spouses typically share housing costs, utilities, insurance, taxes, and many day-to-day living expenses. After divorce, each spouse must independently pay for housing and other living costs while relying on only a portion of the marital assets.
This financial transition often requires both parties to reconsider retirement timelines, investment strategies, and future spending habits.
Divorce does not necessarily prevent someone from enjoying a comfortable retirement, but it frequently requires careful planning to adjust to new financial circumstances.
For many couples, retirement accounts represent one of the most valuable assets accumulated during the marriage.
Depending on the circumstances, retirement assets may include:
Under Illinois law, retirement benefits earned during the marriage are generally considered marital property, regardless of which spouse’s name appears on the account.
As a result, retirement assets are frequently divided during divorce along with other marital property.
Illinois follows the doctrine of equitable distribution rather than automatic equal division.
This means marital property is divided fairly, although not necessarily equally.
When determining how marital assets should be divided, courts may consider numerous factors, including:
Because every divorce is unique, retirement assets are often evaluated as part of the larger financial picture rather than being divided in isolation.
Financial researchers have consistently found that divorce tends to reduce retirement readiness for many Americans.
Several factors contribute to this outcome.
First, dividing retirement accounts means each spouse begins the next stage of life with fewer retirement assets than the couple previously shared.
Second, maintaining two households generally increases overall living expenses.
Third, divorce often occurs during peak earning years or shortly before retirement, leaving less time to rebuild retirement savings.
Finally, legal fees, moving expenses, refinancing mortgages, and establishing separate households can further reduce available assets.
Although these financial challenges are real, careful planning can significantly improve long-term financial outcomes.
Numerous studies examining retirement readiness have concluded that divorced individuals generally face greater financial challenges during retirement than married couples.
Researchers have found that households experiencing divorce often accumulate less overall wealth because assets are divided and future savings opportunities may be reduced.
Some studies also suggest divorced individuals face a somewhat greater risk of exhausting retirement savings later in life, particularly if retirement planning is not revisited after the divorce.
However, researchers consistently emphasize that individual outcomes vary considerably based on education, income, asset levels, career history, and financial planning decisions.
Divorce itself is not the only factor determining retirement security.
Earlier research often suggested women experienced greater financial hardship following divorce because of wage disparities, career interruptions related to raising children, and lower lifetime earnings.
While many women certainly face significant financial challenges following divorce, more recent research presents a more nuanced picture.
Some studies have found that divorced women may perform better than expected in retirement planning under certain circumstances.
One explanation involves home ownership.
When a divorced spouse retains the marital residence, continued ownership may allow that individual to build substantial home equity over time.
Depending on housing market conditions, mortgage payments, and future appreciation, home equity may become an important financial resource during retirement.
That does not mean keeping the marital home is always the best financial decision.
Rather, it illustrates that each asset should be evaluated carefully within the context of a person’s complete financial picture.
Many spouses understandably wish to remain in the family home after divorce.
For some families, keeping the home provides stability for children and preserves important emotional connections.
From a financial standpoint, however, the decision is more complicated.
Keeping the home also means assuming responsibility for:
Although a home may appreciate significantly over time, it may also become financially burdensome if monthly expenses exceed available income.
Before deciding whether to retain the marital residence, it is important to carefully evaluate both its emotional value and its long-term financial implications.
One of the biggest mistakes people make during divorce is focusing exclusively on the immediate property settlement while overlooking long-term retirement planning.
Following divorce, individuals should carefully review:
Updating these financial plans soon after divorce can help improve long-term financial security.
Many employer-sponsored retirement plans cannot simply be divided through a divorce judgment alone.
Instead, division often requires a Qualified Domestic Relations Order (QDRO).
A QDRO is a court order that directs a retirement plan administrator to divide retirement benefits according to the terms approved during the divorce.
Without a properly prepared QDRO when required, transferring retirement assets can become significantly more complicated and may even result in unnecessary taxes or penalties.
An experienced divorce attorney can help ensure retirement assets are transferred properly.
Retirement accounts should never be evaluated solely based on their current account balances.
Different retirement assets have different tax consequences.
For example:
Two accounts with identical balances today may have substantially different after-tax values in retirement.
Proper financial analysis is essential before agreeing to any property settlement.
Not necessarily. Illinois follows equitable distribution rather than automatic equal division. The court considers numerous factors when dividing marital property, including retirement assets.
Generally, retirement benefits accumulated before the marriage may remain non-marital property, although contributions made during the marriage and appreciation attributable to marital contributions may be subject to division depending on the circumstances.
Possibly. Many property settlements involve negotiating different assets rather than dividing every individual account equally. Each case depends upon the couple’s overall financial circumstances.
No. While homeownership may provide long-term equity, it also carries significant ongoing expenses. Every family’s financial situation should be evaluated individually before making this important decision.
A Qualified Domestic Relations Order (QDRO) is a court order commonly used to divide certain employer-sponsored retirement plans during divorce without triggering unnecessary tax consequences.
Yes. Divorce often involves legal, financial, tax, and retirement planning issues. Working with experienced professionals can help you make informed decisions that support your long-term financial goals.
The decisions you make during your divorce can affect your financial security for decades to come. Property division involves much more than determining who receives specific assets—it requires careful consideration of future retirement income, tax consequences, investment growth, housing decisions, and long-term financial stability.
At Gordon & Perlut, our experienced Chicago divorce attorneys understand the complex financial issues involved in divorce, including the division of retirement accounts, pensions, investment assets, real estate, and other significant marital property. We work closely with our clients to develop practical legal strategies designed to protect both their immediate interests and their long-term financial future.
If you are considering divorce or have questions about how your retirement assets may be affected, contact Gordon & Perlut today at our Chicago office at 312-360-0250 or call our Skokie office at 847-329-0101 to schedule a confidential consultation. We can explain your rights under Illinois law and help you pursue a fair and equitable financial resolution that positions you for long-term success.
