What happens to your retirement account when you divorce?

Trying to make sense of your marital estate can be a challenge in the early stages of a divorce. Many people struggle to identify what is truly marital property and what may be separate property that is not subject to division.

Inaccurate information about divorce proceedings may leave people with unrealistic expectations for the process. For example, maybe one of your co-workers recently told you that your employer-sponsored retirement benefits would be separate property that you don’t have to share with your spouse in the divorce.

Is it true that retirement accounts are exempt from property division proceedings?

Retirement funds are often marital property

Even if your retirement account is solely in your name and you opened it before you got married, your spouse still probably has a partial interest in the account. Any amount that you added during your marriage or that your employer contributed during those years will technically be marital income that is subject to division.

In some cases, you may need to divide the actual account using a Qualified Domestic Relations Order (QDRO) to split the balance with your spouse. Other times, you may determine the value of the marital portion of the account and then use that figure to balance other property division decisions. In either approach, you will lose at least some of the value of the account.

Can you protect your retirement savings in a divorce?

Some people have the foresight to negotiate a marital agreement with their spouse. Such contracts give you an opportunity to designate certain property as your separate property in case you divorce later. If you did not reach such an agreement with your spouse, then your best means of protecting specific assets, like retirement accounts, will likely involve an uncontested filing.

You and your ex can negotiate a settlement on your own. The process of resolving your own property division matters may require intense negotiations or even mediation, but the result will be that you retain control over your property division terms instead of giving that authority to a judge.

Learning more about what to expect as you divide your retirement savings for a divorce will help you set realistic and achievable goals.