Pensions help to supplement retirement savings and Social Security benefits when people no longer work full time. While pensions are less common for young professionals than they were decades ago, those retiring now or already enjoying retirement may have earned a pension during their employment.
Pensions can be a primary source of financial stability during retirement. They may also be among the most valuable resources people have obtained during marriage. Pensions are often divisible under equitable distribution rules during divorce proceedings.
What different solutions can help people close to retirement age to fairly address pensions when they divorce?
1. Splitting the pension
Depending on how a company structures and distributes a pension, it is possible to split the pension directly. The use of a qualified domestic relations order (QDRO) provides the other spouse with a portion of the pension in an account in their name.
2. Requesting alimony
Alimony, also known as spousal support, requires that one spouse provide regular financial support for the other after the end of the marriage. The courts can use alimony as a means of balancing the value of a pension during property division proceedings.
3. Using other assets or debts
When directly splitting a pension may not be a viable solution, people have the option of instead determining what portion of the pension benefits that are marital and then using other marital property or shared debts to make the final distribution of resources as far as possible. Home equity, business holdings, vehicles and financial accounts are some of the resources that can offset the financial impact of one spouse retaining a pension.
Working with an experienced divorce lawyer makes it easier for people close to retirement age to handle negotiations effectively and push for terms that are reasonable given their marital circumstances. Every couple requires unique solutions, making an open mind and understanding of the process both critical for successful divorce negotiations.