divorce retirement account mistakes

When dividing assets and debts in a divorce, there will usually be retirement accounts to consider.  Here are 18 common divorce retirement account mistakes:

General Mistakes

  1. Not realizing that different types of retirement accounts are subject to different rules.
  2. Failing to consider that some accounts may be the separate property of one spouse; some may be community property of both spouses and some may be a mixture of the two, at least according to the law.
  3. Not understanding that dividing workplace plans like 401(k)s and pensions requires a special court order (called a QDRO) separate from the divorce agreement and the other required divorce-court paperwork.
  4. Dividing more accounts than necessary.  For each account that is divided (other than IRAs), a QDRO will be necessary.  And QDROs cost extra.
  5. For accounts that will be divided or for which there is some risk that funds will be improperly withdrawn, not obtaining a “joinder” which formally brings the account into the divorce.

IRAs, 401(k)s and similar workplace “defined contribution” accounts

  1. Failing to find out about or deal with existing loans against an account.  Most retirement plans cannot award any portion of a loan balance through a QDRO.  So responsibility for paying off the loan must be made clear.
  2. Not specifying either a clear date of division (e.g. Spouse A gets one-half of the account balance on xx/xx/xx) or a clear amount to be awarded (e.g. $50k to Spouse A) that is not tied to a specific date.
  3. Failing to consider who will bear the risk/reward of account value fluctuations between now and the date the division actually occurs.
  4. Not understanding the tax implications of getting cash out, strategies to minimize taxes and penalties for early withdrawal.


  1. Not obtaining a present value analysis.  Without one, you can’t really compare the value of a pension to the value of other assets.
  2. Failing to specify a clear cut-off date, after which the former spouse isn’t entitled to benefit accruals based on the employee spouse’s continued work for the employer.
  3. Pensions can usually be split in two ways: “shared interest” and “separate interest.”  Each has pros and cons.  Without understanding this, the non-employee spouse may not make the best choice.
  4. When there is a “shared interest” division, not understanding and addressing what happens if the employee spouse dies.


  1. Not getting the QDRO process completed as soon as possible to coincide with the divorce.
  2. Not understanding the extra divorce costs associated with each QDRO and clarifying who will pay them.
  3. Failing to assign responsibility for overseeing the many steps of the QDRO process to either spouse and stopping before it is complete.
  4. Not obtaining some form of certification from the account “Plan Administrator” that the final QDRO has been received and accepted.
  5. Not ensuring the QDRO drafter has expertise in doing so.  This is especially important for QDROs that divide pensions and even more so for those that do not establish a “separate interest” for the non-employee spouse.