Your retirement plan has always been simple: Your spouse has a great job with excellent benefits, including a pension plan. You have put some money aside, but you know that pension will allow you to retire at your same standard of living.
However, since your spouse is still working, it’s not as if any of that money is being given to you yet. It’s in the future, and you’re counting on it for your financial planning.
Now, though, you and your spouse are talking about divorce. You can divide the savings that you have, but, again, you haven’t actually saved that much. If your marriage ends, does that mean you won’t get any of those future pension payments? Is this going to make retirement impossible?
The value of a QDRO
First off, don’t panic. This is a stressful situation and you may feel like things are unraveling. They are not. You do have options.
For instance, a document called a Qualified Domestic Relations Order (QDRO) can often be used to divide future payments. Your spouse may not be getting paid, but they have been earning the pension. Since they’ve earned it while you were married, it’s a marital asset.
For instance, say that they need to work for 30 years to get it. You’ve already been married for 20 years. They’re going to work another 10 after the divorce.
If the court determines that you should get half of the pension, then they will multiply it by the percentage of the marriage in which it was earned. Say that the pension pays out $9,000 per month. You were married for two-thirds of the 30 years, so you have a claim to $6,000 per month. That gets divided with your spouse, so you end up with $3,000. While retirement may look different than you planned, you do not lose the entire pension due to divorce.
The above is just an example of how the court may divide that pension. Every case is unique and you must know what legal options you have.