A concern during divorce is what will happen to retirement funds and 401k plans. People work their whole lives, having a savings account and a plan for retirement - but then a divorce happens and everything changes.

Accrued or vested retirement plans are considered community property and will be divided in a divorce. An example of these types of retirement benefits are: Military pensions, veteran’s educational benefits, ERISA funds, IRAs, Keoghs, Employees stock options, 401k, and 403k.

There are some retirement plans that are not considered community property though - for example: Railroad retirement benefits, Social Security Payments, compensation for military injuries, Worker’s Compensation and disability awards. These benefits would not be divided.

During a divorce all retirement and benefit plans should include either the spouses’ waiver or a division of the benefits. Regardless of the length of the marriage any community retirement benefits will be divided unless otherwise agreed on. It is usually a good idea not to waive the division, unless the partner’s share is not worth very much.

There are a couple ways retirement benefits can be divided. A present day valuation buy out - which is, in a buy out, the partner who is not the owner of the benefits uses the present day value and trades it for the same amount in assets or money. The second type is division into two accounts. If you go with this option make sure you will not lose any tax advantages. You will need a Qualified Domestic Relations Order to transfer a share of the retirement funds from one spouse to the other. It’s a good idea to contact an attorney or the retirement plan administrator for more information.

When dividing retirement benefits spouses need to be careful and make sure they are not short changing themselves. Consulting an attorney or retirement plan administrator will make sure you will maximize your rights and payments.