How will my retirement accounts be divided in my divorce?

Retirement savings, including 401k or IRA plans, are often the subject of discussion when couples are contemplating divorce. In general, courts consider retirement funds added during the course of a marriage — and funds accrued during a marriage — as marital property, which means they can be divided as part of a divorce.

Depending on the type of retirement accounts you have, the court will use a number of factors to divide them. There are two types of retirement savings: qualified and nonqualified. Qualified plans include work retirement plans like pensions or 401ks. Nonqualified plans include IRA and Roth IRA plans.

There is typically a penalty when you attempt to withdraw money early from these plans, but Congress has relaxed the standards for divorcing couples.

For most qualified plans, the court will issue a qualified domestic relations order that specifies how the account will be split. The party who is seeking funds from the other party’s retirement savings is then responsible for reaching out to the company that manages the account. The spouse who is seeking the funds typically has a few options: leave the funds under the same management but in a new account; direct rollover of the funds into the spouse’s own retirement account; take a lump sum before a rollover, which can also be taken in the form of cash. Depending on your financial situation, it may make sense to do any one of these options, but you should consult with your attorney and financial advisor before acting.

For non-qualified plans, like an IRA, the non-participating spouse can either change the name on the account to his or her name or can receive a direct transfer of funds to his or her own accounts.

Regardless of whether you’re holding retirement accounts or seeking them from your soon-to-be-ex, your attorney and financial advisor can help you navigate the process.