Splitting Retirement Accounts Beyond 401(k): Pensions, IRAs, Military, and More

Last reviewed: February 2026

Most people know that 401(k) accounts can be divided in divorce. But many other types of retirement assets — pensions, IRAs, military retirement pay, government pensions, stock options, and deferred compensation — each have their own rules for how they can (and cannot) be split. Using the wrong process can trigger unnecessary taxes and penalties. This guide explains how each type of retirement asset is handled in divorce and what you need to know to protect your share.

IRAs: transfer incident to divorce

Individual Retirement Accounts (traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs) are divided differently from employer-sponsored plans like 401(k)s. A QDRO is not required and should not be used for IRAs.

Instead, IRAs are divided through a "transfer incident to divorce" under IRC §408(d)(6). This allows one spouse's IRA to be transferred directly to the other spouse's IRA (or a new IRA in their name) without triggering taxes or the 10% early withdrawal penalty. The transfer must be made pursuant to a divorce decree or a written separation agreement.

Key requirements for a tax-free IRA transfer:

Important: do NOT withdraw money from the IRA and give it to your spouse as a cash payment. This would be treated as a taxable distribution and may also incur the 10% early withdrawal penalty. The transfer must go directly from one IRA to another.

Pensions: QDRO required

Defined benefit pensions (which provide a guaranteed monthly payment in retirement) require a Qualified Domestic Relations Order (QDRO) to be divided in divorce, just like 401(k)s. The QDRO is authorized under ERISA §206(d)(3) and allows a portion of the pension benefit to be assigned to the non-participant spouse (called the "alternate payee").

Pension division introduces a unique challenge: valuation. Unlike a 401(k) that has a clear account balance, a pension is a promise of future monthly payments. The two most common approaches to dividing a pension are:

Military retirement: the 10/10 rule

Military retirement pay is governed by the Uniformed Services Former Spouses' Protection Act (USFSPA), codified at 10 U.S.C. §1408. Under this federal law, state courts may treat military retired pay as divisible property in divorce.

The 10/10 rule determines whether the Defense Finance and Accounting Service (DFAS) will make direct payments to the former spouse. To receive direct payments from DFAS, the marriage must have lasted at least 10 years, and at least 10 of those years must have overlapped with the service member's military service. If this threshold is not met, the former spouse may still be entitled to a portion of the military retirement pay, but the service member must make the payments directly rather than having DFAS send them.

The maximum that can be directly paid to a former spouse (or multiple former spouses) is 50% of the disposable retired pay. "Disposable retired pay" is the gross retired pay minus certain deductions (such as amounts waived to receive VA disability compensation).

Important: since 2017, the division of military retirement is based on the service member's rank and years of service at the time of divorce, not at the time of retirement. This means that post-divorce promotions and pay increases do not increase the former spouse's share. This change was enacted in Section 641 of the 2017 National Defense Authorization Act.

Federal government pensions (CSRS and FERS)

Federal civilian employees may be covered by either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). Both can be divided in divorce, but the process differs from private-sector QDROs.

Instead of a QDRO, federal pensions require a court order acceptable for processing by the Office of Personnel Management (OPM). The order must meet specific requirements outlined by OPM, including identifying the employee and the former spouse, specifying the amount or formula for the award, and being filed with OPM for approval. OPM will not honor a generic state court order — it must comply with their specific formatting and content requirements.

FERS also includes the Thrift Savings Plan (TSP), which is similar to a 401(k). TSP accounts are divided using a court order, but the TSP has its own requirements that differ from a standard QDRO. TSP court orders must be processed by the TSP record keeper and comply with TSP-specific rules. For details, see the TSP court order guidance on tsp.gov.

Stock options and RSUs

Stock options and restricted stock units (RSUs) are forms of deferred compensation that can be significant marital assets. Their treatment in divorce depends on when they were granted, when they vest, and the specific terms of the award.

The key question is: are the options/RSUs marital property? Options granted during the marriage and vested during the marriage are generally considered marital property. Options granted during the marriage but vesting after the divorce may be partially marital and partially separate, depending on how the court allocates them. A common approach is the "time rule" or "coverture fraction," which divides the options based on the proportion of the vesting period that occurred during the marriage.

Valuing stock options can be complex because unvested options have uncertain value — the stock price may go up or down before the options can be exercised. Some courts assign a present value using financial models; others defer distribution until the options are actually exercised. A CDFA or financial expert familiar with equity compensation can help determine the best approach for your situation.

Deferred compensation plans

Non-qualified deferred compensation plans — where an employee agrees to receive a portion of their pay at a later date — are handled differently from qualified plans like 401(k)s. Because non-qualified plans are not covered by ERISA, a QDRO cannot be used. Instead, the division is typically handled through the divorce decree itself, with the participating spouse required to pay the non-participating spouse their share when the deferred compensation is eventually paid out.

This creates a timing and credit risk: the non-participating spouse must wait until the participating spouse actually receives the deferred compensation, and if the employer becomes insolvent before then, the deferred compensation may be lost entirely (non-qualified plans are generally unsecured creditor claims against the employer). Make sure your attorney addresses these risks in the settlement agreement.

Pensions, IRAs, military retirement, and deferred compensation all have different tax treatments — making dollar-for-dollar comparisons misleading. DivorceSmart Pro compares the after-tax value of each account type side by side through retirement.

Tax considerations across all account types

Not all retirement dollars are worth the same amount after taxes. When evaluating whether a proposed split is equitable, consider the after-tax value:

A $200,000 traditional IRA is not equivalent to $200,000 in a Roth IRA or $200,000 in a brokerage account. Failing to account for the tax differences can result in a settlement that looks equal on paper but is significantly unequal in practice.