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What happens to retirement accounts in divorce?

On Behalf of | Dec 9, 2023 | Divorce

It can be tricky to divide retirement accounts during a divorce. In fact, a retirement account is an asset that many people overlook, simply dividing the things that they own at that moment. The retirement account or pension plan may already exist, but since they haven’t retired yet and aren’t receiving payments, they don’t think there is any way to divide that asset.

But there is. The key is to divide it in the future. Say that your spouse is the one earning the pension, and they were doing so while you were married. They are eventually going to start collecting, even if it’s not for years or decades after the divorce. When they do, you may deserve a percentage of that retirement plan, based on how much of it was earned during your marriage.

How do you protect your rights?

Naturally, it’s impossible to divide many pension plans or employer-sponsored retirement accounts at the time of the divorce. What divorcing couples can do, though, is use a qualified domestic relations order. The court can calculate the percentage of the retirement plan that should go to each person, and then issue a court order saying that it has to be divided as such in the future. 

Once your ex does retire and starts getting those pension payments, they are legally obligated to send you a portion as an alternate payee. This may not mean half of the entire payment, as each situation is unique, but it can protect at least a portion of your retirement assets. The key is simply to get everything set up in advance so that this goes smoothly. Be sure you know what legal steps to take.