Divorced: No QDRO Retirement Account Division

If retirement accounts weren't divided in your settlement, that simplifies compliance but may create ongoing planning opportunities around pension and 401(k) issues.

Why couples skip the retirement split: Sometimes it is simpler to offset values -- one spouse keeps the house, the other keeps the 401(k). Other times, retirement accounts are roughly equal and both parties keep what they have. Either approach avoids the cost and delay of a QDRO.

The tax implication of offsets: An asset-for-asset trade in divorce is generally tax-free at the time of transfer. But the assets you received may carry very different future tax burdens. A brokerage account with a low basis will generate capital gains when sold. The house may qualify for an exclusion. Cash has no future tax cost. Your CPA can help you understand the after-tax value of what you actually received.

Rebuilding retirement solo: If your ex kept the larger retirement accounts, you may need to accelerate savings. Catch-up contributions allow people 50 and older to contribute an extra $7,500 per year to a 401(k) and an extra $1,000 to an IRA (as of 2024). Starting at age 60, the 401(k) catch-up increases to $11,250.

The tradeoff: Avoiding a QDRO saves legal and administrative costs upfront, but you may have accepted assets with a heavier tax burden than the retirement accounts your ex retained. A CPA can quantify that difference.