Divorce and dividing retirement accounts

In short

A friend of mine once told me the house was the easy part of his divorce. The retirement accounts were what kept him up at night. If you are facing the same thing, know that a court order can split a 401(k) or a pension, and it must be written the right way. A plain divorce decree is not enough for most workplace plans. The paper that moves the money is called a qualified domestic relations order, or QDRO. An IRA works differently, and it can be split under the divorce decree with a transfer done right. Many plans will send their model order if you ask, and it helps to keep every statement from the date of separation forward. You are not being greedy by asking about your fair share. You are being careful.

The whole of it

What it is

I once watched a woman at a church supper explain that she had worked thirty years and never once looked at her husband's 401(k) statement. She was not foolish. She simply trusted the man. Many of us do. Then a divorce comes along, and suddenly those statements matter a great deal.

Retirement money often ranks as one of the largest things a couple owns. In many states, savings built during the marriage are treated as shared property, even if only one spouse's name is on the account. Other states use different rules. Your own state's law decides how this works for you.

There are two main kinds of accounts you may face. The first is a workplace plan, such as a 401(k), 403(b), or pension. These are governed by a federal law called ERISA. The second is an IRA, which you open on your own at a bank or brokerage.

That difference matters. The two kinds of accounts follow different paths, and mixing them up can cost real money.

How it works

Let me start with the workplace plans, because that is where folks get tripped up. A divorce decree by itself does not tell a 401(k) administrator what to do. The plan needs a separate document, the QDRO. It is an order from a court that names the plan, names the person receiving the money, and says how much goes to whom. The plan administrator reviews it and decides whether it qualifies. If the order is sloppy, the plan can reject it, and you start over.

Many plans will send you a model order when you request one. A friend of mine noticed that lawyers charge by the hour, so a model order can cut the time spent drafting. Some people hire a specialist who does nothing but QDROs, and that can be a fine choice for a big account or a pension.

Once the plan accepts the order, the person receiving the money is called the alternate payee. That person can often roll their share into their own IRA. Doing so keeps the money growing without tax due right away. Or they can take it as cash. Cash taken from a 401(k) under a QDRO is treated a bit differently from a normal early withdrawal. The Internal Revenue Service publishes Publication 575, Pension and Annuity Income, and Publication 504, Divorced or Separated Individuals, and both touch on this topic. Their pages spell out how such payments are taxed.

An IRA is simpler. It can be divided under the divorce decree or a written separation agreement, and the money moves by a direct transfer from one IRA to another. Cashing it out and handing over a check can trigger tax and penalties for the person who owned the account. IRS Publication 590 A covers transfers incident to divorce.

Pensions add another wrinkle. A traditional pension pays a set monthly amount in retirement. A court can order part of that payment to go to the former spouse. Some plans let the former spouse start receiving it when the worker retires. Others pay it out in different ways. The plan's own rules control this, so ask the plan office.

The numbers, and where to find yours

You will want a few figures in hand before anyone signs anything. The account balance on the date of separation matters in many states, because savings built after that date may belong only to the person who earned them. Your lawyer can tell you which date your state uses.

Then look at the yearly limits. The most a person can put into a 401(k) in one year is the current figure, which the official source publishes each year. The most for an IRA is $7,500 for 2026 (source, checked 10/4/2026). People who are older can add extra, called a catch up contribution, and that amount is the current figure, which the official source publishes each year. The age when that extra room opens is the current figure, which the official source publishes each year. These matter because a settlement can leave one spouse behind in savings, and knowing the room to rebuild is useful.

The early withdrawal penalty is a percent set by law, and it is 10 for 2025 (source, checked 9/27/2026). The age when it stops applying to most withdrawals is the current figure, which the official source publishes each year. Remember that a QDRO distribution can be treated differently from an ordinary one.

For your own numbers, pull your latest statement from each plan. Log in to the plan website or call the number on the paper. You can request a statement dated close to the separation date. You can also ask whether any loans are outstanding, because a loan lowers what can be divided.

A worked example

Let me tell you about a couple I will call Dan and Marie. They were married for twenty years. Dan earns 52,000 dollars a year at a shop, and he put in enough to get a match of 3 percent from his employer. His 401(k) held 90,000 dollars on the date they separated. Marie had an IRA worth 20,000 dollars.

They lived in a state that treats savings built during the marriage as shared. Everything in both accounts was built while they were married. So they added the two accounts. 90,000 plus 20,000 is 110,000 dollars.

They agreed to split it evenly. Half of 110,000 is 55,000 dollars each. Marie keeps her own IRA at 20,000 dollars. She needs 35,000 more to reach 55,000, since 55,000 minus 20,000 is 35,000. That 35,000 comes out of Dan's 401(k).

Dan's 401(k) then falls from 90,000 to 55,000. Check it. 90,000 minus 35,000 is 55,000. Marie's total is 20,000 plus 35,000, which is 55,000. Both end up even.

To move it, their lawyer asked the 401(k) plan for its model order. The court signed a QDRO for 35,000 dollars. The plan approved it. Marie chose to roll her 35,000 dollars straight into her IRA. No tax was due on that move, and no penalty either. Had she taken cash instead, she would have owed income tax on it. Dan kept his 55,000 dollars growing.

Real accounts rise and fall while the paperwork is pending. A good order says whether the share is a fixed dollar amount or a percent, and whether it includes gains or losses after the split date.

Where it goes wrong

I have heard the same sad story more than once. Two people agree on a split, the judge signs the divorce, and then nobody writes the QDRO. Years pass. One spouse dies or remarries or retires, and the other finds out the money was never moved. The order has to be done. It cannot be left to sit.

Another mistake is cashing out an IRA to pay a spouse. It feels quick and tidy. It is neither. The tax bill can land on the wrong person. A direct transfer avoids that.

People also forget that a dollar in a 401(k) is not the same as a dollar in a savings account. Money in a traditional 401(k) has not been taxed yet. Money in a Roth account was taxed already. Trading 10,000 dollars of one for 10,000 dollars of the other is not a fair swap. It helps to know what kind of dollars are on each side.

Watch for loans, too. A loan against a 401(k) lowers the balance. Written numbers from the plan settle any doubt.

Last, mind the survivor rules on pensions. Some plans end the former spouse's payments if the worker dies first, unless the order says otherwise. That single line can decide whether a former spouse is cared for in old age. It deserves two readings.

Questions to answer before you leave this page

Do you know which state's rules will decide how your retirement savings are divided, and what date that state uses to count the balance? Have you asked each plan for a statement and its model order? Can you tell which of your accounts are traditional and which are Roth, so you compare like with like? Is there a loan or a pension in the mix that changes the math? Will your share be rolled into an IRA, or do you need cash, and do you understand the tax on each choice? Who will draft the QDRO, and when will it be filed with the court? And what does feeling secure look like for you, in plain words you could say out loud?