How would a divorce impact my retirement savings?

1 min read by Rachel Carey Last updated January 23, 2024

Dividing marital assets can impact your living standards, with retirement plans and pensions among the most valuable assets in a divorce. So, how do you prepare to divide your savings, and how can you protect the money you’ve built up?

How would a divorce impact my retirement savings?  

Divorce or a legal separation can severely affect retirees’ and soon-to-be retirees’ lives.  

You’ve spent your life building up these savings, and you don’t want to see them depleted. So, when it comes to who gets what during a divorce, retirement plans are targeted by both spouses. If you have been a non-working spouse during your marriage, targeting the retirement fund is even more critical as you don’t want to be left with no savings for the future.  

Any accumulation of retirement funds earned during your marriage typically qualifies as martial assets and will be subject to division. If you have an IRA or defined contribution plan such as a 401(k), although these accounts only have a sole account holder, the money that goes to them during a marriage technically belongs to both parties. 

Any savings made before marriage are considered separate property.  

While dividing these assets is usually straightforward, dividing guaranteed pensions can be trickier when survivors’ benefit, alternative assets, and life insurance policies come into play.  

Here is an insight into how the most common retirement funds get divided during a divorce.  

How are retirement savings split in a divorce? 

Dividing retirement funds can be a complex and emotional undertaking. However, understanding the process and anticipating the impact such a life change will have can help make the process easier. 

Defined contribution plans 

For defined contribution plans, including employer-sponsored plans such as 401(k)s, and 403(b)s, a qualified domestic relations order (QDRO) is a court order used to divide retirement assets.  

The plan's value is determined and divided however the court deems appropriate with a QDRO. This must comply with  the Employee Retirement Income Security Act (ERISA), which governs these plans. 

Those receiving these payments can roll the money into a retirement account without incurring any tax consequences.  


Dividing IRAs in a divorce is easier than other retirement assets.  

They are divided using a process known as ‘transfer incident to divorce.’ The court will consider multiple factors, including the account's value and the marriage's length, and determine how it will divide the IRA.  

Those receiving money from an ex-spouse’s IRA will require their own IRA account to move the amount into. They will also not pay tax on this rollover.   

Defined benefit plans  

A defined benefit plan, such as a pension, will provide you a set amount each month during retirement. As such, determining the value of this isn't easy. This is also true when you consider people may enroll in these plans before they get married – making money contributed during that time separate property.  

Similar to a defined contribution plan, a defined benefit plan will be divided however a court deems fit with a QDRO. This can result in a one-time lump sum, or each ex-spouse is granted a share of the benefits.  

Social Security 

It may surprise you, but your Social Security can also be eligible for division during a divorce.  

According to the Social Security Administration, if you are 62, unmarried, and divorced from someone entitled to Social Security retirement, you may be eligible to receive benefits based on their record. You must have been married to your ex-spouse for 10 years or more to be eligible.  

It’s also important to note if you qualify for Social Security retirement, your benefit must be less than your ex-spouse’s. Social Security will only pay the higher of the two. There are several other caveats to claiming benefits. You can visit the Social Security website to find out what you must do to collect. 

It’s also important to note your state will affect how you divide your retirement assets.  

Nine states – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin – implemented community property laws to make dividing assets during divorce less contentious. 

Under this law, a couple must split all assets acquired during the marriage equally.  

Three other states – Alaska, South Dakota, and Tennessee – have an "opt-in" community property law that allows such a division of property if both parties agree. 

Steps to take to protect my retirement savings during divorce  

Protecting your retirement savings will mean different things depending on your position within the marriage.  

If you have been the main earner, you may have contributed more money, so your goal may be to keep as much of this as possible. Conversely, if you have been the lower earner (or have focused on raising the family), your retirement savings may be much lower or even non-existent. Therefore, in the divorce financial settlement, you should aim to secure enough retirement pension assets to support you in later life. 

Regardless of your position, there are steps you can take to protect your retirement income: 

1. Plan ahead 

While it may not be what you want to think about during your engagement or within your first few months of marriage, developing a plan for what will happen in the event of a divorce could save a lot of heartache in the future.  

You can create a binding prenuptial agreement ahead of your wedding day to outline how you will divide retirement assets during a divorce. You can create a postnuptial agreement if you’re already married and want to outline your arrangements. 

Creating these agreements while you’re planning your future together or happily married will help ensure assets are divided fairly without the influence of animosity or anger.  

2. Be aware of survivorship 

It’s important to understand how dividing retirement assets will affect you. One thing to look out for is survivors’ benefit.  

Should your ex-spouse die before retirement or before you, you may still be eligible to receive retirement income. Here, you need to ensure you’re listed as a survivor or beneficiary on their plan.  

For example, a defined benefit plan can feature a single or joint-life payout. Should your ex-spouse die before you, enrolling in a joint-life payout will ensure you continue to receive benefits for the rest of your life.  

3. Work with a financial advisor 

Divorce is a turbulent time in your life. From splitting assets to concerns about your financial future, divorce can hugely impact your finances. 

A financial advisor can help guide you through your finances during a divorce and help you recover afterwards. 

They will assess your financial situation, including your income, expenses, assets, and debts, and create a holistic plan to manage your assets. 

This can include dividing your assets and reallocating your investment to align with your new goals. A financial advisor can also help you navigate how to pay your legal fees and other expenses. 

A financial advisor can help you split your assets and develop a financial recovery plan after divorce. With the guidance of an expert advisor, you can move forward and feel confident about your financial future. Unbiased can help you find your perfect financial professional. Get started here.

Senior Content Writer

Rachel Carey

Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.