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How do I divide our retirement account during a divorce
May 10, 2021

What will happen to my retirement in the event of the dissolution of my marriage?

For a smart financial planner,  in a New York divorce action, a retirement account, pension, or 401k can provide a sense of financial security and stability as you approach older age.  But a divorce, on the other hand, is not usually something you have planned for – and, if it occurs, the equitable distribution of marital assets could complicate or even de-rail your long-standing plans for the future.


Is my ex-spouse really entitled to part of MY retirement accounts?

Generally, in New York State, all assets accumulated during a marriage are considered “marital property” and are therefore subject to equitable distribution in the event of a divorce. These assets usually include real estate, bank accounts, and personal property, but can often also include equitable distribution of retirement accounts or pensions accrued by one or both parties.

In a divorce, the share that a dependent spouse takes of retirement savings is dependent on his contributions – tangible or intangible – to the acquisition of the assets. This could include such contributions as providing childcare for the parties’ children and/or and caring for and maintaining the home so that the other spouse may freely work outside of the home. These actions by a dependent spouse establish entitlement to a portion of the funds.

In situations where both spouses have retirement assets, especially where the amounts therein are similar, the parties may simply waive each other’s interests in their respective assets. Even in cases like these where an agreement is come to between the parties, a QDRO (Qualified Domestic Relations Order) is required in order to divide the assets without negative tax consequences that would come from liquidating the accounts.  A QDRO also outlines guidance for what will be done with any appreciation or depreciation of the funds in the time before it is implemented.

The results in any given situation may vary based on your individual circumstances, but there are several general rules used in New York State when it comes to dividing retirement assets in a divorce.


  1. Pre-marital Retirement Accounts

If you had a pre-existing retirement account or 401k before entering into the marriage, the balance of the account at the time of the marriage remains your separate property and will not be subject to equitable distribution. A dependent spouse may not claim an interest in the fund’s premarital assets.

Questions may arise surrounding a pre-marital retirement account when it comes to appreciation in value of the pre-marital funds that occurred during the marriage. In cases where a premarital contribution has appreciated significantly during the marriage, it is sometimes necessary to engage an expert to calculate the entitlement of the dependent spouse to a portion of the appreciation.


  1. Defined Contribution Plans

            A defined contribution retirement plan is a retirement account that allows an employee to save a portion of their earnings in a way that has tax advantages. Types of defined contribution plans include 401Ks, 403Bs, IRAs, 457s or TSPs. A defined contribution plan’s value is easily ascertained by the account balance and can be divided however the Court sees fit.

In dividing a defined contribution retirement account, the value of the account is generally divided into pre-marital and marital portions. The pre-marital portion will not be subject to equitable distribution, but the marital portion is. Typically, a defined contribution retirement plan is often divided along the same lines as other accounts and assets during equitable distribution.

It should be noted that “equitable distribution” does not mean equal distribution – rather, equitable means fair and taking into account the contributions of both parties. Thus, a spouse who stayed home and performed certain domestic tasks to allow the other to accrue the funds in the 401K is likely entitled to a portion despite not actually physically earning the money therein. Similarly, though, a spouse who did not contribute in any way to the account holder’s ability to accrue the 401k is not likely to receive 50% just by virtue of the funds being marital.


  1. Defined Benefit Plans (Pensions)

Dividing a pension is a bit more complicated than dividing a defined contribution plan, as it is more difficult to ascertain its value – the value of the pension is not equal to the amount of money in the account. A pension is a regular payment made during retirement from an investment fund to which a plan participant or their employer has contributed during their years of service. A pension, however, is not always

A pension earned during a marriage in New York State is considered marital property. The most commonly used equitable distribution formula for a public pension is the Majauskas formula, which provides an ex-spouse with one-half of that part of a pension plan participant’s pension earned during the marriage.[1]  For example, if the plan participant accrued ten years of service during the marriage, but retires with twenty total years of service, the ex-spouse’s share would be 25% of the pension.

It should be noted that the Majauskas formula, though the most common, is not required to be used, and the Court may determine a different computation in unusual or extraordinary circumstances.


  1. Possible Effect of Retirement Assets on Spousal Support

It should be noted that money withdrawn from a retirement account is viewed by the Court as income, potentially affecting the maintenance calculation – thus, if one’s retirement assets alone would allow him to continue living a comparable lifestyle to that enjoyed during the marriage on their own, his spousal maintenance award may be reduced or considered unnecessary by the Court.


If you are concerned about your retirement plans, consider entering into a pre-nuptial agreement prior to the marriage. A pre-nuptial agreement can spell out exactly what will occur with your retirement assets in the event of dissolution, avoiding potential complications that can arise in equitable distribution of the accounts later.


Your New York Divorce Lawyer  Lisa Beth Older 

[1] 50% × years of service credit accrued during marriage (numerator)÷ total service credit at time of retirement (denominator)