Last Updated June 14, 2022
Illustrated by Cristi Cash

Fairly dividing retirement savings between both partners in a divorce can make a huge difference in their future financial stability.

Dividing Retirement Assets

Often, substantial amounts of marital assets are tied up in pensions or other retirement funds. If you and your spouse have your own employer-sponsored plans, you may each elect to keep your own. But if one spouse doesn't have their own retirement savings, the funds may need to be split between both of you. A court-ordered Qualified Domestic Relations Order (QDRO) makes that possible.

Securing a Fair Share

A QDRO is a judgment or order formally creating the right of an alternate payee (the spouse without the account) to receive all or some of the benefits payable to a particular retirement plan participant (the spouse with the account). As part of a divorce decree or court-approved property settlement, a state agency or authority, such as a court, can issue a QDRO.

You should keep in mind that QDROs must be issued before the divorce papers are finalized. Remember, too, there are no second chances. A QDRO must be included in the divorce agreement.

To get the QDRO process started, you should consult an experienced divorce attorney and have them draw up a QDRO as part of, or in addition to, the divorce settlement.

an abstract fifty-fifty discussion
Illustration: Cristi Cash

Alternatively, there are online resources that provide step-by-step guidelines to help you prepare a QDRO yourself for court-approved signature. However, because this document will have a significant impact on your financial future and security, and because the court may refuse to accept one that doesn't meet its standards, consulting with an experienced professional is probably the safer approach.

Requirements, Rules, and Regulations

The Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC) require that certain information be provided for a domestic relations order to qualify as a QDRO. Here's the basic information you'll need:

  • Your spouse's name and mailing address (as the "plan participant") and your name and mailing address (as the "alternate payee")
  • The name of each retirement plan to be divided as terms of your divorce
  • The dollar amount or percentage (and the method of determining the amount or percentage) of the benefit to be paid to you
  • The number of payments or time period covered by the QDRO

In addition, the QDRO must meet the requirements of the retirement plan's QDRO rules and procedures. This plan-specific information will be outlined in the retirement plan document. Be sure to take it, along with the plan summary, when you meet with your attorney. If you don't have access to plan information, call the human resources department at your spouse's employer. Someone will be able to tell you how to contact the retirement plan administrator.

The plan administrator may not rule on the validity of the QDRO immediately, so you can ask that your share of the assets be set aside until the ruling is final. That way, your spouse can't borrow or withdraw those amounts while the QDRO is under review.

Protecting Your Financial Future

While an employer-sponsored retirement plan may be the largest retirement asset you'll want to consider, it isn't the only one that may need to be divided in a divorce. Individual retirement accounts (IRAs) are also considered marital property if a spouse made contributions and accumulated earnings while they were married.

It's easy to forget about retirement assets during emotional times of divorce, especially if retirement isn't in the near future. But by having a clear plan to ensure each spouse receives their fair share of the assets, your divorce settlement can be a solid foundation for both partners' future financial security.

Women's Retirement Savings

Seeking financial security when divorcing is especially crucial for women. This is because two main sources of retirement income—pensions and Social Security—are based on a lifetime of earned income. Since women earn, on average, 21% less than men, and often work fewer years, they can expect to receive less from these sources when they retire.

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