The portion of each spouse’s retirement plan that was earned during the marriage and the growth of that investment related to that portion is a marital asset and thus subject to equitable distribution upon divorce. Retirement plans include traditional and Roth IRAs, 401(k)’s, 403(b)’s, 457 plans, defined benefit plans, defined contribution plans, cash balance plans, ESOPs, and SEPPs. These plans differ in how they are funded and by whom, but they are all marital assets if earned during the marriage. It does not matter when the funds are withdrawn from the retirement plans.
As an example, a person gets married 7 years after they start working for XYZ, Inc. Ten years later they divorce and 5 years after that they retire. So this person has accumulated 22 years of retirement benefits, but only 10 years of it would be considered marital assets (from year 7 to 16), plus the interest/appreciation earned on those 10 years of investment. As you can imagine, figuring out the value of some of these retirement plans and investments can be complicated and difficult and subject experts may need to be relied upon.
Couples will need to value all of the marital portions of all their retirement plans (which can also be waived) and determine how to split those. Many can be done in a lump sum, some with payout when in pay status. The court can order the splits as part of the divorce decree (done in different ways depending on the type of retirement plan).
There are tax implications depending on how these are done, all of which can be explored in mediation.