Dividing assets in a divorce becomes more complex when retirement accounts enter the picture. These accounts often represent substantial long-term investments, and you may not gain access to them for years. Still, if you earned them during the marriage, the law treats them as marital property.
Here’s what you need to understand about how the process works.
What counts as marital property?
The court includes only the portion of a retirement account earned during the marriage in the division. Contributions before the marriage stay separate. If you added funds to a 401(k) or pension plan during your marriage, the court will likely divide that portion, no matter whose name appears on the account.
This rule covers many retirement assets, including 401(k)s, IRAs, pensions, and similar plans.
How do courts divide accounts?
Colorado follows equitable distribution, which focuses on fairness rather than a strict 50/50 split. Judges look at factors like the length of your marriage, your incomes, and how you divided other property.
To divide retirement accounts, the court often requires a Qualified Domestic Relations Order (QDRO). This document instructs your plan administrator to transfer funds without causing tax penalties or early withdrawal fees.
Do you have options besides court?
Yes. You and your spouse can create a separation agreement that details how you want to divide retirement assets. For example, you might keep your full pension while your spouse keeps the home. As long as the arrangement appears fair and both of you agree, the court usually accepts it.
If you can’t reach an agreement, the court will step in and make that decision for you.
Retirement accounts can shape your financial future after divorce. Know which parts count as marital, and keep clear records of their value. This preparation helps you pursue a fair outcome during the division process.