How Retirement Accounts and Benefits Are Affected by Divorce


A common concern of individuals contemplating divorce is the division of property. Retirement accounts and social security benefits are typically the most valued assets during a divorce. Individuals divorcing after the age of 50 are likely to place an even higher value on retirement benefits since financial concerns tend to increase as the age of retirement approaches. Over the past five years, the amount of persons divorcing after the age of 50 has steadily, yet significantly, increased. This blog will discuss how retirement accounts and social security benefits are treated during a divorce proceeding.

Classification of Both Retirement Accounts and Social Security Benefits

California is a community property state which generally, for purposes of divorce, means that in theory each spouse is entitled to one-half of all property acquired during marriage. Separate property refers to all property or assets acquired prior to marriage, by gift, or inheritance. Separate property is typically not subject to division during divorce. Therefore, the way in which retirement accounts and benefits are affected by divorce depends on whether they are considered community property or separate property.

Oddly enough, and in spite of the fact that both retirement accounts and social security benefits can accrue during marriage, only retirement accounts are considered community property and are thus subject to division. California law considers retirement accounts to be deferred compensation for services rendered, whereas Federal law has, in effect, declared social security benefits to be future income and has statutorily defined the benefits as being separate property.

Division of Retirement Accounts in Divorce Proceedings

Since accrued or vested retirement benefits, such as, but not limited to, pension plans, IRA’s, 401K and 403 plans, and defined benefit plans, are considered community property they are subject to the presumptive 50/50 division. However, it is quite common that an individual contributed towards that retirement plan prior to marriage. In such a case, the non worker spouse is only entitled to half of the community interest in the retirement plan. In other words, the non worker spouse is entitled to half of the benefits that accrued in the plan from the date of marriage to the date of separation.

For example, if you have a couple who has been married for 20 years, but the retirement plan in question began to accrue benefits 30 years ago, then the non worker spouse is entitled to half of the benefits that accrued during those last 20 years.

How the retirement benefits are logistically divided are not set in stone and the parties may get creative if they so choose. For instance, the parties can decide to offset the amount of the retirement plan the non worker spouse is entitled to with a different asset or by adding to monthly support payments. However, there are certain types of retirement accounts where standard division is practical and rather easy.

Dividing retirement plans through divorce requires additional forms to be filed with the court. Specifically, a Qualified Domestic Relations Order (QDRO) is required. A QDRO outlines how retirement assets are distributed to each party in the divorce and must be consistent with the settlement agreement or final judgment that must be completed and filed prior to the filing of the QDRO.

Social Security Benefits

Social Security Benefits are considered the separate property of the individual spouse and thus is not subject to division at divorce. However, if you are divorced but your marriage lasted ten years or longer, you remain unmarried, and you are of the age 62 or older, you may be entitled to one-half of your ex-spouse’s Social Security benefit if the benefit you are entitled to receive based on your own work is less than the benefit you would receive based on your ex-spouses work even if your ex-spouse has remarried. If you are entitled to both your own retirement benefits and divorced spouse benefits then, typically, your retirement benefit will be paid out first and then the divorced spouse benefits would kick in so that the combined benefits would equal out to the higher amount (the amount your ex-spouse is entitled to). It should be noted that the amount you are entitled to under the divorced spouse benefits do not in any way affect the amount your ex-spouse will receive. In other words, your ex-spouse will still receive 100% of his or her own social security benefit.

Further, if your ex-spouse passes away, you could be entitled to benefits as if you were a widower, so long as your marriage lasted ten years or more. Any benefits paid to you as a surviving divorced spouse who meets the age or disability requirement as a widow or widower will in no way affect the benefits available to other survivors getting benefits under your deceased ex-spouse’s social security benefit.

Going through the process of divorce can be extremely overwhelming. Going through a divorce at a later age, nearing retirement or during retirement where significant retirement benefits are involved can be even more daunting. If you are facing such issues, please call the Law Offices of Robert J. Nachshin, P.C. at 310-478-4600.