Retirement Accounts: Asset or Stream of Income?

Retirement Accounts: Asset or Stream of Income?

By Diane Pappas, CDFA®, CQS™ On 10/13/2025

Retirement accounts in divorce are unique because they are both marital assets and deferred income earned during the marriage. Yet courts, attorneys, and even conciliators often treat them rigidly, pensions in pay status as income, IRAs and 401(k)s as assets, without fully accounting for the financial reality. Ignoring this dual nature can create inequitable outcomes, particularly when the spouse receiving support has sufficient resources.

A recent case in my practice illustrates this tension and, frankly, the frustration of advocating for clients when common sense is overlooked.

Case Overview

• Wife: 58 

• Husband: 71 (13-year age difference)

• 21-year marriage

• Wife retirement assets at divorce start: $2 million

• Husband retirement assets: $1.2 million

My client, the wife, was employed as a Radiologist at a Boston hospital, earning $300,000 per year.  The husband had retired from his medical practice with a similar prior income and had sufficient resources to support his lifestyle. He was also receiving two pensions in pay status and Social Security totaling $7,100 per month.  

The divorce became fairly contentious when the husband started taking distributions from his IRA, in violation of the Automatic Restraining Order (Rule 411) which prevents disposing, transferring or selling assets without agreement from all parties. that goes into effect upon filing a Complaint for Divorce.  He withdrew over $400,000 apparently to reduce his IRA balance and maximize his share of the marital retirement assets.

I included these distributions as additional income for support purposes,  but opposing counsel and the conciliator refused to recognize them as income for alimony or child support.  One report I prepared estimated his RMDs at his current age to be $67,000, which, when combined with the pensions and Social Security amounted to over $148,000 per year before taxes.  Although this was less than my client’s income, it was more than sufficient to cover his lifestyle according to his Massachusetts Financial Affidavit.   

Yet, this case was classified as an alimony case, even though the Husband did not have a  financial “need”.  

Alimony Is for a Spouse in Need—not Just a Mechanism to Transfer Wealth

Massachusetts law is explicit: alimony is intended for a spouse in need of support.  Under M.G.L. c. 208 §48, alimony is defined as:

“the payment of support from a spouse, who has the ability to pay, to a spouse in need of support for a reasonable length of time, under a court order.”

This definition makes clear that alimony is not simply a mechanism to transfer wealth from one spouse to another. In my client’s case, the husband had sufficient income from his pension, Social Security, and IRA distributions to meet his needs.  Yet the court required ongoing alimony payments, ignoring his financial self-sufficiency and effectively penalizing my client, the spouse with the majority of retirement assets.

My client was ordered to pay $3000 per month until her age 67 when the husband would be age 80 and would have already begun required minimum distributions (RMDs) for several years. During a pretrial hearing, the judge remarked, “This is what you get for marrying someone 13 years older than you”.

Why This Case Frustrated Me

As a CDFA®, my role was to present the financial reality:

• The husband had more than enough income to meet his needs and did not require support.

• His IRA distributions, the pension, and Social Security created significant cash flow, yet they were ignored in support calculations.

• My client, a woman with the majority of retirement assets, was effectively penalized for having liquidity and a younger age.

• Despite repeated efforts, the attorneys, conciliator, and the judge to step back from rigid legal categorizations and consider his actual income potential income. 

I am confident that if the genders were reversed, the court would not have required a husband to pay support to an older wife in her 80’s when he turned 67.  This was a case where financial logic was sidelined, despite clear CDFA® analysis.

Statutory Support: Retirement Distributions as Income

Retirement accounts exist because of income earned during employment that has been deferred, not because money “magically appears.” Massachusetts law recognizes that these accounts produce enforceable income.

Under M.G.L. c. 208 §36A, when a spouse is under a court order to pay alimony or child support, the court may use a trustee process to collect support directly from the obligor’s disposable earnings, which include:

• Wages, salary, or bonuses

• Periodic payments from pensions or retirement programs

This applies not only to current earnings but also to future earnings, including ongoing distributions and required minimum distributions (RMDs). In my client’s case, the husband’s current and future IRA distributions clearly fell within this statutory definition, yet were ignored in support calculations. This illustrates both the statutory recognition of retirement income as enforceable support and the critical role of CDFA professionals in ensuring all disposable earnings are properly accounted for.

Lessons for CDFA Professionals

This case underscores several lessons for us as financial professionals:

1. Retirement accounts are dual-role assets: They are both marital property and future income streams. Modeling only one aspect can produce inequitable results.

2. Project distributions and pensions carefully: IRA withdrawals, RMDs, pensions, and Social Security all affect cash flow and support obligations.

3. Advocate for financial reality: Courts and attorneys may focus on legal definitions, but CDFAs can bridge the gap with clear, defensible modeling.

4. Recognize systemic biases: Gender, age differences, and perceptions of “need” can influence outcomes. Our analysis must be robust enough to withstand these biases and clearly demonstrate inequities.

5. Common sense matters: Sometimes the best advocacy is helping the court take a step back and look at the actual numbers, not just the legal framework.

Takeaway

For CDFA professionals, this case is a reminder that our role extends beyond spreadsheets and formulas. We are the financial interpreters.  We translate numbers into a story that reflects fairness, reality, and long-term security.

Retirement accounts are more than assets, they are deferred income earned during the marriage.   Ignoring either the asset or income side of the equation can compromise equitable outcomes.  If we don’t model both sides, the client may pay the price.

Tagged with: retirement accounts, RMDs

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