Divorce Pension Valuations

Because of their value and growth potential, pensions and their survivor benefits are an important consideration when planning the division of assets during the divorce process.

A pension plan is a type of retirement plan where an employee adds money into a fund that includes contributions by the employer. The worker’s pension payments are determined by the length of the employee’s working years and the annual income they earned on the job leading up to retirement.

Typically, upon retirement, the employee can choose to receive those pension benefits as a lump sum, or in a series of steady, annuity-like payments through the course of his or her retirement.

Pension plans are calculated based on three key criteria:

  1. The employee’s years of service at a specific company or organization.
  2. The employee’s age.
  3. The employee’s annual compensation, or an average of current and past compensation.for a number of years.

Most pension plans are taxable, and you’ll need to fully understand the amount of any potential tax on your pension plan proceeds. We can help you navigate the tax implications and advise you what financial actions are necessary.

A Pension Valuation compares the value of the pension and compares the resulting total to current values of a defined contribution such as a 401(k). The valuation takes the sum of the monthly stream of income, applies discount factors, mortality factors and others that will calculate the stream of the income to a dollar amount that is its present value. The value then can be compared to other retirement plans. The health of the pension is also researched to determine its solvency and ability to pay out future benefits. The Pension Valuation calculation can offer insight as to whether to take the stream of income in the future, or, perhaps to trade off other retirement plans such as a 401(k).

The Pension Valuation is of a financial planning nature. A trained CDFA® can assist you and a lawyer in navigating the financial aspects of your divorce.

At Divorce Financial Solutions, we have the necessary pension valuation expertise. An experienced retirement solutions consultant who has designed and managed pension plans with Plan Administrators, such as Veralynn Morris, will be able to help each party understand the implications and long-term effects on future finances. This is helpful whether you seek her advice as the plan participant or the alternate payee. Ms. Morris is not a lawyer and her services, are not intended as a substitute for legal services. A trained CDFA® can assist you and a lawyer in navigating the financial aspects of your divorce. We will provide you with a list of lawyers in your area upon request.