Pensions can be a little trickier. When looking at a pension you first have to determine how much of your pension is considered to be a marital asset and if you are dividing it now or later. If some of your pension was earned before you were married you will probably need an actuary to do some complicated math to determine what dollar amount of your pension is considered to be a marital asset. There are some complex formulas that are used. It is not as simple as looking at a statement, like you can do with a 401(k) or IRA.
There are two methods to distribute the monies in a pension- Immediate Offset Method and Deferred Distribution Method. Both are well-named. The Immediate Offset Method means you find out the present marital value of the pension (let’s say $300,000 just like in the example above) and offset the value with another equivalent holding from the big pot of marital assets. So instead of getting $150,000 of the pension, you get $150,000 more than your spouse from the sale of the house (which sold for $500,000) and your spouse keeps full ownership rights to the pension. Person A gets $400,000 from the sale of the house and none of the pension. Person B gets $100,000 from the sale of the house and all $300,000 of the pension.
The Deferred Distribution Method means you are waiting to get money from the pension. You determine that one spouse will get x percentage or dollar amount from the pension and the other spouse will get the rest. However, this does not happen until the pension holder is eligible to receive the retirement benefits. You are deferring or waiting for some point in the future to get your marital share of this asset.
Neither method is better than the other. You have to determine which works better for your situation. At Westfield Mediation, LLC we help you figure out what your post-divorce economic life will be. This can help your work out how best to divide your retirement funds.
For more information on dividing retirement funds in a divorce or divorce mediation, please contact Randi M. Albert, JD, or Michelle Weinberg, M. Ed., Licensed Marriage and Family Therapist, at Westfield Mediation, LLC at 908.913.0373. View our website at www.westfieldnjmediation.com or email us at firstname.lastname@example.org.