In a divorce, any retirement savings built up during the marriage are treated as marital property and divided between the spouses, no matter whose name is on the account. That is the short answer to what happens to retirement accounts in a divorce, but the mechanics matter: 401(k)s and pensions are split through a court order called a Qualified Domestic Relations Order (QDRO), while IRAs move through a direct transfer under the divorce decree. Using the wrong process can trigger income tax and a 10% early withdrawal penalty that neither spouse planned for.
What Part of the Account Is Actually on the Table
Only the marital portion of a retirement account gets divided. Contributions made during the marriage, plus the investment growth on those contributions, are generally marital property. Contributions made before the wedding, along with growth on that premarital balance, usually stay with the account holder as separate property.
How the marital share is split then depends on where you live. Community property states divide marital assets 50/50. Equitable distribution states aim for a “fair” split based on the length of the marriage, each spouse’s financial situation, and their respective contributions. Fair often means equal, but not always.
Vesting can also come up with employer plans that require a certain number of years of service before the employee has a permanent right to employer contributions. Courts in many states still count the unvested portion earned during the marriage as part of the marital estate, even though the employee-spouse has not fully earned it yet.
For a 401(k) or similar defined contribution plan, calculating the marital share is a matter of comparing the balance on the date of marriage to the balance on the valuation date set by your jurisdiction (often the date of separation, filing, or final hearing), adjusted for any separate contributions or withdrawals. Pensions are harder because they promise a future monthly payment rather than hold a lump sum, and dividing them typically requires either an actuary’s present-value calculation or a formula that gives the non-employee spouse a share of each future payment.
Splitting a 401(k) or Pension With a QDRO
Most private-sector employer plans are governed by ERISA, which has anti-alienation rules that normally block anyone other than the participant from receiving plan benefits. A QDRO is the exception. It is a court order directing the plan administrator to pay a specified portion of the participant’s benefits to an “alternate payee,” which in a divorce is almost always the former spouse.1U.S. Department of Labor, Employee Benefits Security Administration. QDROs Chapter 1 – Qualified Domestic Relations Orders: An Overview
A valid QDRO has to name both spouses, specify the amount or percentage going to the alternate payee, and identify the plan. It cannot force the plan to pay benefits it does not otherwise offer or increase total benefits beyond what the plan provides.2Internal Revenue Service. Retirement Topics – QDRO: Qualified Domestic Relations Order
The practical advice almost every QDRO specialist gives is to contact the plan administrator before drafting. Many plans publish their own QDRO procedures and model language, and some will pre-approve a draft order, which can save months of revisions later.3U.S. Department of Labor, Employee Benefits Security Administration. Qualified Domestic Relations Orders under ERISA: A Practical Guide to Dividing Retirement Benefits A rejected or poorly drafted QDRO can delay access to funds and, if the participant changes jobs or starts taking withdrawals before the order is approved, can put the alternate payee’s share at real risk.
Death and Survivor Protection
Dividing the balance is only half the job. If the participant-spouse dies, the alternate payee’s share can disappear without the right language in the order.
Federal law requires certain defined benefit and money purchase plans to offer a Qualified Joint and Survivor Annuity, which pays a surviving spouse a portion of the participant’s benefit after death. A QDRO can require the plan to treat a former spouse as the surviving spouse for this purpose. Without that language, the participant can remarry and the new spouse becomes the survivor beneficiary automatically.4Internal Revenue Service. Retirement Topics – Qualified Joint and Survivor Annuity A Qualified Pre-retirement Survivor Annuity provides similar protection if the participant dies before reaching retirement, and should also be addressed in the QDRO. Adding these protections later is much harder and sometimes impossible.
For a 401(k) or other defined contribution plan, there is no annuity to protect. The critical step is making sure the alternate payee’s share has been segregated into their own account. Once it is, the money is theirs no matter what happens to the participant.
Splitting an IRA Is a Completely Different Process
QDROs do not apply to IRAs.5Charles Schwab. Divorce After 50: The Impact on Retirement Savings An IRA is divided by a direct transfer from one spouse’s IRA to an IRA in the other spouse’s name. Under federal tax law, the transfer is not taxable as long as it is made under a divorce decree, separation agreement, or a written instrument incident to the divorce.6Office of the Law Revision Counsel. 26 U.S. Code 408 – Individual Retirement Accounts
The transfer has to go directly between IRA custodians. If you withdraw the money yourself and then try to hand it to your ex-spouse, the IRS treats it as a distribution to you, with income taxes and potentially a 10% early withdrawal penalty on top. IRS Publication 504 requires the transfer to be explicitly called for by the divorce or separation instrument, and transfers made after the divorce is final must occur within six years of the date the marriage ended.7Internal Revenue Service. Publication 504 (2025), Divorced or Separated Individuals Once the transfer is complete, the receiving spouse’s IRA is treated as if it had always been theirs.
Roth IRAs transfer under the same tax-free rules, with one extra wrinkle: the five-year clock on tax-free earnings withdrawals carries over with the account. If the Roth has not been open for five years yet, early withdrawals of earnings could be taxable. Check when the account was first funded before agreeing to accept a Roth IRA in a settlement.
The Tax and Penalty Trap Everyone Should Know
Done correctly, dividing a retirement account creates no tax bill for either spouse at the time of the split. The receiving spouse pays income tax only when they eventually withdraw the money, the same way the original account holder would have.2Internal Revenue Service. Retirement Topics – QDRO: Qualified Domestic Relations Order Traditional accounts are taxed as ordinary income on withdrawal; qualified Roth withdrawals are tax-free.
The 10% early withdrawal penalty is where people lose money. Normally, pulling money out of a retirement account before age 59½ triggers that penalty on top of the income tax.8Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Distributions from a qualified plan paid to an alternate payee under a QDRO are exempt from the 10% penalty, no matter the recipient’s age.9Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
There is no equivalent exception for IRAs. Even if a divorce court orders you to pull money out of a traditional IRA and give it to your former spouse, the 10% penalty still applies if you are under 59½.10Internal Revenue Service. Retirement Plans FAQs Regarding IRAs Distributions (Withdrawals) Always use a direct trustee-to-trustee transfer for IRAs.
One planning note on the QDRO exception: an alternate payee can roll a QDRO distribution from a 401(k) into their own IRA tax-free and keep the money growing tax-deferred.2Internal Revenue Service. Retirement Topics – QDRO: Qualified Domestic Relations Order But once the money sits in an IRA, the QDRO penalty exception no longer applies. If you expect to need some of the cash before age 59½, consider taking that part directly from the 401(k) under the QDRO (penalty-free) and rolling only the rest into an IRA.
Military, Federal, and State Government Plans
If one spouse’s retirement is through the military or a government employer, the private-sector QDRO process does not apply cleanly.
Military retirement pay is divided under the Uniformed Services Former Spouses’ Protection Act. The Act does not automatically award a former spouse any share of retired pay; a court order has to grant it. The Defense Finance and Accounting Service will send payments directly to a former spouse only if the marriage lasted at least 10 years overlapping with 10 years of creditable military service (the “10/10 rule”). A court can still award a share below that threshold, but the former spouse would have to collect from the service member rather than through DFAS.
The federal Thrift Savings Plan uses its own order, called a retirement benefits court order, with specific formatting requirements; noncompliant orders get rejected. State and local government pensions that fall outside ERISA follow the plan’s own rules and applicable state law, which vary widely.
Social Security Benefits on an Ex-Spouse’s Record
Social Security is not a retirement account that gets divided in the decree, but it is a retirement benefit that divorced people often overlook. If your marriage lasted at least 10 years, you may be able to collect benefits based on your ex-spouse’s earnings record, worth up to one-half of their primary insurance amount.11Office of the Law Revision Counsel. 42 U.S. Code 402 – Old-Age and Survivors Insurance Benefit Payments
To qualify, you have to be at least 62, currently unmarried, and not entitled to a higher benefit based on your own work history. If your ex-spouse has not filed for benefits yet, you also need to have been divorced for at least two years.12Social Security Administration. Code of Federal Regulations 404.331 – Who Is Entitled to Wife’s or Husband’s Benefits as a Divorced Spouse Claiming on your ex-spouse’s record does not reduce their benefit or affect a new spouse’s benefit. If your marriage is close to the 10-year mark and divorce is on the horizon, the timing of the filing can decide whether you qualify at all.