August 11, 2025
Dividing assets when a marriage ends is overwhelming. Retirement accounts further complicate matters as early withdrawal can result in penalties. And since these savings represent not just money, but security for the future, what’s really at stake is peace of mind.
In Oregon, dividing retirement accounts during a divorce involves more than simply splitting balances. You’ll need to understand what counts as marital property, how the law treats different types of accounts, and what steps to take to ensure a fair and legally sound division of retirement accounts.
In this article, we’ll cover everything you need to know about retirement assets in divorce and the tax implications of dividing retirement accounts that you need to be aware of.
To get started, let’s answer a common question we get when it comes to dividing 401(k)s in divorce.
Generally, yes.
Regardless of the state you live in, if a 401(k) or retirement account (or a portion of it) is deemed martial property it can be divided in a divorce. Marital property means it was earned or accumulated during the marriage, regardless of whose name the account is in.
In Oregon, ORS 107.105(1)(f)(A) explicitly states that, “a retirement plan or pension or an interest therein shall be considered as property.”
There’s also a strong legal presumption that both spouses contribute equally to the property acquired during the marriage, even if only one person earned a paycheck or had a retirement plan through their employer.
In other words, if one spouse was working and contributing to a retirement account while the other was home raising children, the law considers the homemaker to have contributed equally to the retirement account by supporting the household. This includes contributions to 401(k)s, IRAs, pensions, and other retirement accounts.
In the case of 401(k)s and retirement accounts, money contributed to the account before the marriage is generally considered separate. This means these accounts can be considered both marital and separate property, since contributions can be made before marriage and continue during marriage.
When accounts contain both marital and premarital contributions, courts typically only divide the marital portion.
In a divorce, property is either divided according to equitable distribution or community property rules. In community property states, marital assets are generally split 50/50 between spouses. In equitable distribution states, such as Oregon, the court’s goal is to divide assets fairly, which doesn’t necessarily mean a 50/50 split. This includes retirement accounts.
While a 50/50 division is often the starting point in equitable distribution, especially in long marriages, courts have a wide discretion to divide assets however they deem just and fair.
Courts may settle on a different percentage split based on:
The length of the marriage
Each spouse’s financial contributions (including staying home or raising children)
The value of other assets and debts
Each spouse’s future earning potential
For example, if one spouse came into the marriage with a substantial retirement account, the court may decide to keep that premarital portion with them. But if the marriage was long and both spouses relied on that asset for future retirement, it may still be shared in the interest of fairness.
These employer-sponsored retirement accounts are usually divided based on the portion earned during the marriage. If your spouse had a 401(k) when you married and continued contributing throughout the marriage, only the portion that grew during the marriage is typically split.
Let’s say your spouse had $30,000 in their 401(k) when you married, and the account is now worth $130,000. The court may treat the $100,000 earned during the marriage as marital property and divide that amount fairly between you.
Traditional and Roth IRAs can also be divided in a divorce, though the process is slightly different (more on that below). As with 401(k)s, the focus is on contributions and growth during the marriage.
If your spouse has a pension (such as through Oregon PERS), it’s also subject to division. In most cases, the court will award you a portion of the benefit based on how many years of service overlapped with the marriage. The division may be set up so you receive a share of each monthly payment once your spouse retires.
Splitting a retirement account without following proper procedures can trigger taxes and penalties. For example, withdrawing funds from a 401(k) under the age of 59½ results in a 10% early withdrawal tax.
Because many retirement plans have tax-deferred status and restrictions on withdrawals, the law provides specific mechanisms to divide them upon divorce.
Here’s what you need to know:
Transfers under a Qualified Domestic Relations Order (QDRO) or divorce decree are tax-free. If you receive part of your ex’s 401(k) through a QDRO, you can roll those funds into your own retirement account with no penalties. Similarly, assets distributed as part of a divorce settlement are not taxable. Here in Oregon, ORS 107.105(3) states that this kind of transfer “is not a taxable sale or exchange”.
You may be able to access cash without the 10% early withdrawal penalty. If you do need to take a distribution from a 401(k) you received via QDRO, the 10% early withdrawal penalty is waived even if you’re under age 59½. You’ll still owe income tax, but this can be a useful tool if you need funds immediately.
IRAs follow different rules. If you’re receiving IRA funds, they must be transferred via a direct trustee-to-trustee transfer. If done correctly, the transfer is tax-free. But if you or your ex withdraws the funds before transferring, you could be stuck with a tax bill and a penalty.
Taxes affect long-term value. A $100,000 401(k) is not the same as $100,000 in home equity or cash. Consider future tax obligations when negotiating who gets what.
Next, let’s take a look at the role played by QDROs.
Dividing most retirement plans, especially 401(k)s and pensions, requires a QDRO.
A QDRO is a court-approved document that tells the retirement plan’s administrator to transfer a specific portion of the account to the former spouse. It ensures that the transfer happens without triggering early withdrawal penalties or unexpected tax bills.
Here are some important considerations when it comes to QDROs:
Each retirement plan needs its own QDRO.
IRAs don’t require a QDRO, but must still be divided according to the terms of your divorce judgment.
If a QDRO isn’t submitted and approved by the plan administrator, the retirement account won’t be divided, even if your divorce judgment says it should be.
Since account holders or administrators require very specific, court-approved language, it’s a good idea to have a lawyer draft your QDRO.
Related: What to Expect During My Divorce Consultation?
To sum things up, dividing a 401(k) or other retirement account in divorce is similar to dividing any other asset. How it’s divided will depend on whether you live in a community property or equitable distribution state, as well as if the account in question is considered marital or separate property.
While dividing pensions in divorce are not generally considered taxable events, it’s important to consult with a divorce attorney and draft a QDRO when necessary to avoid paying early withdrawal fees.
If you’re currently going through a divorce and have questions about dividing retirement assets, you can count on the family lawyers at Gevurtz Menashe. We help individuals and families throughout Oregon and Washington make informed decisions during some of life’s most difficult transitions.
Feel free to schedule a consultation to discuss how we can ensure your share of retirement savings is protected and help you avoid costly tax mistakes along the way.
