Divorce and Federal Retirement Benefits: Where the Financial Landmines Really Hide

Missy E
November 14, 2025

Key Takeaways

Divorce can directly impact your federal retirement benefits, including pensions, Thrift Savings Plan (TSP) accounts, and survivor benefits, often leading to unexpected financial losses if not handled properly.
Understanding court orders, beneficiary designations, and federal rules today can save you from costly mistakes that surface long after your divorce is finalized.

The Hidden Complexity of Divorce and Federal Retirement Benefits

Divorce is never simple. But when federal retirement benefits are involved, the financial pitfalls become even trickier to navigate. You might assume that your pension, Thrift Savings Plan (TSP), and insurance policies are safe unless explicitly split by a court. However, federal rules, state laws, and even simple paperwork errors can drastically alter your financial outcome.

If you are a public sector employee thinking about divorce or already facing one, it is critical to understand where the true risks lie.

Understanding How Federal Retirement Benefits Are Divided

Federal retirement benefits fall under specific regulations when it comes to divorce settlements. These rules can work in your favor — or against you — depending on how you approach them.

Court Orders: A court can award a portion of your FERS or CSRS pension to your ex-spouse through a “court order acceptable for processing” (COAP).
Thrift Savings Plan (TSP): The court can award all or a portion of your TSP account via a Retirement Benefits Court Order (RBCO).
Survivor Benefits: Unless explicitly waived, a former spouse may also be entitled to a survivor annuity.

Failing to include precise instructions in the divorce decree could leave you with significantly reduced benefits or unexpected obligations.

1. How Pensions Can Be Affected After Divorce

Your pension is often the largest financial asset you hold as a federal employee. But it can also become the most vulnerable.

A COAP allows division of your “self-only” annuity, reducing your monthly payment permanently.
Payments to a former spouse continue even if you remarry.
Survivor benefits for an ex-spouse must be funded through deductions from your own retirement annuity, decreasing your monthly retirement income.

In 2025, the average CSRS annuity exceeds $4,400 per month, and the average FERS annuity is about $1,800 monthly. Even a small percentage allocation can cost you thousands annually.

2. Survivor Benefits Are a Commonly Overlooked Danger

Many divorcing federal employees assume that once the marriage ends, so do survivor benefits. In reality, that’s not automatic.

Former spouses can still be entitled to a survivor annuity unless specifically addressed in the divorce decree.
If you fail to elect a new survivor, your retirement may be reduced by default to provide for an ex-spouse’s survivor annuity.
A survivor benefit election for a former spouse must generally be made within two years of the divorce.

Missing this deadline could mean you are locked into expensive survivor costs that reduce your annuity for life, even if your ex never claims the benefit.

3. TSP Accounts Are Not Always Divided Equally

TSP accounts are treated similarly to private 401(k) plans in divorce, but with federal nuances.

TSP division depends on what is outlined in the RBCO.
A court can order a set dollar amount or a percentage of your account balance as of a specific date.
The ex-spouse’s portion is removed tax-free into a rollover-eligible account if properly transferred; otherwise, significant tax penalties could apply.

Remember, any delay or unclear language in the RBCO could freeze your account, blocking withdrawals or loans for months until issues are resolved.

4. FEHB Coverage May Not Extend to Former Spouses

Federal Employees Health Benefits (FEHB) coverage is valuable in retirement, but divorce changes eligibility drastically.

Ex-spouses lose FEHB coverage unless they qualify under the Spouse Equity Act or Temporary Continuation of Coverage (TCC).
TCC is expensive, lasting only up to 36 months.
Lifetime eligibility requires a qualifying court order and continuous coverage without a break.

Without proactive action during divorce proceedings, a former spouse could be left with no ongoing health insurance, or you might inadvertently pay for expensive coverage you did not intend to provide.

5. Life Insurance Decisions Demand Immediate Attention

Federal Employees Group Life Insurance (FEGLI) policies are another asset frequently forgotten in divorce.

Divorce does not automatically change your FEGLI beneficiary designations.
Your former spouse could remain the beneficiary unless you actively update your paperwork.
In some divorce settlements, a court may require you to maintain FEGLI coverage for a former spouse or minor children.

Updating your Standard Form 2823 immediately after a divorce is critical to ensure your intended beneficiaries receive your benefits.

6. Court Orders Must Meet Exact OPM Standards

For federal benefits to be divided, the court orders must meet Office of Personnel Management (OPM) guidelines. Otherwise, they may be rejected.

COAPs and RBCOs must have precise, federally acceptable wording.
Ambiguous language can delay benefit payments by months or years.
You or your attorney must ensure compliance with OPM regulations at the time of divorce, not afterward.

It’s not uncommon for retirees to discover — sometimes years later — that their divorce order did not do what they thought it would do. In 2025, this remains a leading cause of benefit delays and disputes.

7. Cost of Mistakes Grows Over Time

Financial errors made during a divorce are rarely visible immediately. But by the time you retire — possibly 10, 20, or 30 years later — the cost can be devastating.

Loss of annuity income could add up to tens or hundreds of thousands of dollars over retirement.
Paying for a survivor benefit that was never needed can cost you hundreds monthly for decades.
Delayed TSP access can limit your financial flexibility and retirement choices.

Protecting your financial future requires precision today.

8. Key Steps to Protect Yourself Right Now

Taking charge of your financial security during a divorce means being proactive.

Work with an attorney who understands federal retirement rules.
Draft clear, OPM-compliant language for court orders.
Address survivor benefits explicitly, both during and after divorce.
Update all your beneficiary forms immediately after the divorce is finalized.
Confirm that TSP orders are properly worded and sent to the TSP agency promptly.

In 2025, federal retirement benefits are simply too valuable to leave to chance.

9. Post-Divorce Actions You Should Not Ignore

Even after your divorce is finalized, your work is not done. To fully protect yourself:

Review your TSP, pension, FEGLI, and FEHB enrollments.
Revisit your retirement planning timeline to reflect changes in assets.
Reassess your survivor benefit elections and make any necessary updates.
Stay informed about annual benefit changes and adjustments.

A mistake left unaddressed could follow you all the way into retirement.

10. Financial Planning for a New Future

Divorce reshapes your retirement landscape. But if you act wisely, you can still achieve a strong and stable retirement.

Adjust your savings rate if your annuity or TSP balance was reduced.
Consider delaying retirement to rebuild lost assets.
Rework your retirement income strategies to reflect a single life rather than a joint life.
Factor in new healthcare costs if FEHB coverage changes.

In 2025, many divorced federal employees are successfully rebuilding their financial security, but only because they took decisive, informed action.

Protecting Your Retirement After Divorce

Divorce can feel like a financial earthquake, but you do not have to navigate the aftershocks alone. By acting strategically today, you can defend your hard-earned benefits and secure a strong future. If you are facing divorce, recently divorced, or simply want to review your situation, getting professional help is crucial.

Reach out to a licensed professional listed on this website to make sure your retirement remains protected, no matter what changes life brings.