Understanding How Retirement Accounts Are Divided in Divorce
Dividing retirement accounts during a divorce can be confusing, especially because different types of accounts require different legal processes. Two of the most common types of retirement accounts—401(k)/pensions and IRAs—are handled differently under divorce law.
Below is a quick comparison chart to help you understand the key differences between how these accounts are divided, what legal documents are required, and how the process affects taxes and penalties.
QDRO vs. IRA Transfer in Divorce
Topic
401(k) / Pension
IRA (Traditional or Roth)
Legal Instrument Required
QDRO (Qualified Domestic Relations Order)
Transfer Incident to Divorce (via Divorce Decree)
Plan Type
ERISA-covered plans (401(k), pension)
Non-ERISA plans (IRA, Roth IRA)
Who Prepares the Document
Attorney or QDRO Specialist
Language included in Divorce Decree / Separation Agreement
Court Approval
Required (must be signed by judge)
Part of the divorce decree – no separate order needed
Tax Treatment
Tax-free transfer to ex-spouse if done correctly
Tax-free transfer if done correctly
Early Withdrawal Penalty
No penalty when rolled over to alternate payee’s account
No penalty if transfer is done directly as part of divorce
Receiving Spouse’s Options
Transfer funds to their own retirement account
Transfer funds to their own IRA account
Complexity
More complex, requires formal QDRO process
Simpler, handled by decree and financial institution
Cost
$500–$2,500+ for QDRO preparation and approval
No formal QDRO cost; possible attorney fees for decree wording