What Happens to Retirement Accounts in a Divorce?
When going through a divorce, most people focus first on dividing the home, bank accounts, or even who keeps the dog. But one of the most significant assets in a marriage — retirement savings — is often overlooked until late in the process. Whether you or your spouse have a 401(k), IRA, or pension plan, these funds are typically considered marital property and may be subject to division.
In this article, we’ll explain how retirement accounts are treated in divorce, what legal tools are required to split them, and a few important considerations, especially if you live in a community property state like Arizona.
Are Retirement Accounts Considered Marital Property?
In most cases, yes. If any part of a retirement account was earned or contributed during the marriage, it is likely considered marital property and subject to division in a divorce.
That includes:
401(k)s
Traditional and Roth IRAs
403(b)s
Pension plans
Thrift Savings Plans (TSPs)
Military retirement benefits
State or federal government retirement systems (e.g., FERS, CSRS)
However, contributions made before the marriage may be considered separate property, depending on the state and the ability to trace those funds.
Community Property vs. Equitable Distribution
Every state follows one of two systems for dividing marital property:
Community Property States
States like Arizona treat most property acquired during the marriage as jointly owned. That means retirement accounts accumulated during the marriage are typically split 50/50, regardless of who contributed more.
Equitable Distribution States
Most other states use a system that aims for a fair (but not necessarily equal) division. Judges may consider factors like the length of the marriage, each spouse’s income, and future earning potential when deciding how to divide retirement assets.
How Retirement Accounts Are Divided
401(k)s, 403(b)s, and Pensions
These accounts require a Qualified Domestic Relations Order (QDRO) — a court order that tells the plan administrator how to divide the account between spouses. Without a QDRO, even a judge’s divorce decree isn’t enough to legally split the funds.
A QDRO must:
Clearly identify the plan and parties involved
Specify the amount or percentage to be transferred
Be approved by both the court and the plan administrator
Failing to prepare a QDRO properly can result in delays, tax penalties, or even the loss of benefits.
IRAs
Dividing IRAs is simpler because no QDRO is required. Instead, the division must be clearly outlined in the divorce decree. A trustee-to-trustee transfer should be used to avoid taxes or early withdrawal penalties.
Timing Matters
Just like other assets, retirement accounts are typically valued as of a specific date, most often the date of separation or the date the divorce petition is filed. This valuation date can vary by state and by court order, so it’s important to clarify when the division becomes effective.
Also, note that certain plans (especially pensions) may not be divisible until the spouse retires or reaches a certain age, which can affect the timing of distributions.
Special Considerations in Arizona
Arizona, headquarters of Harmony Law, is one of only nine community property states in the U.S. That means:
Contributions made during the marriage are presumed to be jointly owned.
The increase in value of a retirement account during the marriage is also community property.
Contributions made before the marriage are considered separate property. However, if the account was active during the marriage, tracing the separate vs. marital portions can be complex.
Don’t Forget About Survivor Benefits
If your spouse has a pension or military retirement plan, you may be entitled to survivor benefits or future disbursements. These must be clearly addressed in the divorce decree and the QDRO. Failing to address survivor benefits can mean losing out on payments after your former spouse dies.
Get Legal Help Early
Dividing retirement assets is one of the most technical parts of the divorce process. Mistakes can be costly and difficult to fix. At Harmony Law, we work closely with our clients to ensure retirement accounts are fairly and legally divided with no surprises down the road.
If you’re going through a divorce or legal separation and have questions about dividing retirement savings, we're here to help. Contact us for a free case review.
