Divorce- Help with Present Value Pension Calculation

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Gardener
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Divorce- Help with Present Value Pension Calculation

Post by Gardener » Thu Aug 01, 2019 7:45 am

I am going through a divorce which is now in mediation. Get along well, trust each other re: finances. Please don't ask then why don't you stay together? It was her call, not mine.

Assets are being divided.

Question comes to my pension being divided since I am a federal civilian employee now. Does anyone know how I get a present value calculation for this?

Here are the basic details.

I am 36 years old. Soon to be former Spouse is 35.
Worked (and continuing to work) 4.5 years(66 months) as a federal civilian (occurred after marriage)
Served 4 years military prior to marriage
Top 3 years of fed earnings were last three- 85k,75k, 65k

If I need to provide more inputs, I can.
I appreciate any help with this. Grateful for your time.

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BL
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Re: Divorce- Help with Present Value Pension Calculation

Post by BL » Thu Aug 01, 2019 8:31 am

Never thought about it.
How about splitting your contributions, inflated by some fairly conservative factor, maybe 5%, to get today's value on that.
It seems to me that you are both too young to consider future pensions, but I know nothing. I expect you are vested, however, so it does have some value.

Jack FFR1846
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Re: Divorce- Help with Present Value Pension Calculation

Post by Jack FFR1846 » Thu Aug 01, 2019 8:40 am

Can you go to your HR and get an estimate of future payout based on if you quit today?

Are you also doing this split for her social security? I would think so, if she'd eligible. If you only get pension and not social security, is your future pension and her social security nearly the same? If so, just leave both off the table.

Also, if you did quit today, would you lose the pension or are you vested and can start at some age, no matter what?
Bogle: Smart Beta is stupid

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8foot7
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Re: Divorce- Help with Present Value Pension Calculation

Post by 8foot7 » Thu Aug 01, 2019 8:45 am

How long were you married? I’d argue at 36 that half of the present value of your pension, whatever it actually is, is so small that it should be weighed against the length of your marriage. That’s what my ex and I decided when it came to her state pension that, while she was vested, reflected less than five years of an elementary teacher earnings and thus was essentially immaterial.

dbr
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Re: Divorce- Help with Present Value Pension Calculation

Post by dbr » Thu Aug 01, 2019 8:54 am

I think the division of federal pension benefits upon divorce is a little more complicated than this. I am not an expert but see here: https://www.federalretirement.net/divor ... ations.htm

Calico
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Re: Divorce- Help with Present Value Pension Calculation

Post by Calico » Thu Aug 01, 2019 9:19 am

You could always do what I did when my husband divorced me (we mediated too). I told him he could figure it out or we could each just take our own retirements and leave it at that. He opted for the latter because it was easier to figure out (nothing to figure out).

I am serious too, would your soon to be ex wife agree to just taking her retirement and you taking yours and leaving it at that? If not, I would recommend maybe figuring out an arrangement to buy her out (paying her a lump sum of sorts if it's possible or something along those lines). I don't say that for financial reasons, but more for the benefit it will give you emotionally to have a clean break when this is all done.

Good luck with everything and hang in there. As someone who is also divorced and went though mediation, I know it can still be rough and stressful.

BobTheTerp
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Re: Divorce- Help with Present Value Pension Calculation

Post by BobTheTerp » Thu Aug 01, 2019 9:20 am

Your ex will not get any of your pension until you retire and there has to be a specifically formatted court order that specifies how to compute her portion.If you continue to work for the government until you meet retirement criteria, nothing will be done regarding the pension. However, property is another matter and this would include your TSP. And this could also depend on the state you live and divorce in. In most states she will get half of property (retirement, bank savings, home equity if any, furniture, etc....) When you retire, she could get half of your pension, but ONLY for the years of marriage. So, if you work for 30 years and were married for 5 of those years, she could 50% of those 5 years of pension. Some government organizations will estimate your retirement benefits and some will not do it until you submit your retirement papers. However, none can show you the math and result of impact to your pension from the divorce. This is only done by the OPM as they process your retirement and the court order (submitted with your papers) is reviewed by their government lawyers to determine the computation impact of the pension for the marital years of service.

This can get very complicated and you and your attorney should have a firm grasp on how divorce can affect a government employee because they can make other arrangements with his knowledge. For example, you may be able to buy her out of your pension now vice waiting years+ for you to retire. Also, if your wife has an equal retirement, the judge my decide to let each of you keep your own retirement. There are law firms that specialize in government divorces and you can google them.

Good Luck....
Bob

THY4373
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Re: Divorce- Help with Present Value Pension Calculation

Post by THY4373 » Thu Aug 01, 2019 10:55 am

Not a Federal pension but my pension had a cash balance. My ex and I treated that as the same as a traditional 401k balance and then when we split assets and I essentially bought my spouse out of my pension by giving them some extra of my 401k. For us that was the best because it was a clean break.

Good luck on your divorce. My ex and get along great and we both agree it was the best thing to happen to us in recent times though horrible to go through.

stungerz
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Re: Divorce- Help with Present Value Pension Calculation

Post by stungerz » Thu Aug 01, 2019 11:24 am

Google divorce forensic accountant. I paid an them about $600 to figure that out.

If you ping me off line, I can send you the person who did it for me.

Also, best of luck with the divorce.

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Gardener
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Re: Divorce- Help with Present Value Pension Calculation

Post by Gardener » Thu Aug 01, 2019 12:48 pm

Appreciate all of the input. Forgive me that I don't respond to each post.

Our mediator was estimating we are talking about $5-10k going toward spouse to account for my pension.

Amount of cash, retirement, etc being divided is ~$775k.

Married in 2010.

dbr
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Re: Divorce- Help with Present Value Pension Calculation

Post by dbr » Thu Aug 01, 2019 1:16 pm

Gardener wrote:
Thu Aug 01, 2019 12:48 pm
Appreciate all of the input. Forgive me that I don't respond to each post.

Our mediator was estimating we are talking about $5-10k going toward spouse to account for my pension.

Amount of cash, retirement, etc being divided is ~$775k.

Married in 2010.
Be sure you have a court ordered QDRO that is accepted by OPM if your to be former spouse is abandoning any claim to your federal pension or other benefits. Federal retirement is a rule-bound operation and if you don't have an attorney or the mediator who is familiar with Federal retirement you might want to find someone who is. https://www.opm.gov/retirement-services ... ri84-1.pdf

Flashes1
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Re: Divorce- Help with Present Value Pension Calculation

Post by Flashes1 » Thu Aug 01, 2019 1:45 pm

I'm no wizard with NPV's of federal pensions, but I think I would jump on the chance to buy her out of it for $10k.....especially when you're dividing $775k....that's peanuts and a federal pension can be worth a lot more in a few decades than $10k right now.

bsteiner
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Re: Divorce- Help with Present Value Pension Calculation

Post by bsteiner » Thu Aug 01, 2019 1:45 pm

stungerz wrote:
Thu Aug 01, 2019 11:24 am
Google divorce forensic accountant. I paid an them about $600 to figure that out.
...
More likely an actuary would be the better choice.
Gardener wrote:
Thu Aug 01, 2019 12:48 pm
...
Our mediator was estimating we are talking about $5-10k going toward spouse to account for my pension.

Amount of cash, retirement, etc being divided is ~$775k.
...
Given the relatively small amount in question with regard to the retirement benefits compared to the total assets, agreeing on a number is preferable to trying to calculate precise values (which will depend on future events anyway).

ColoRetiredGirl
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Re: Divorce- Help with Present Value Pension Calculatio

Post by ColoRetiredGirl » Sat Aug 03, 2019 9:14 am

I am not sure but as a federal employee and in FERs or CSRS, you may want to ask HR what they see. I think but not sure if they have some sort of calculation.

stan1
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Re: Divorce- Help with Present Value Pension Calculatio

Post by stan1 » Sat Aug 03, 2019 9:26 am

ColoRetiredGirl wrote:
Sat Aug 03, 2019 9:14 am
I am not sure but as a federal employee and in FERs or CSRS, you may want to ask HR what they see. I think but not sure if they have some sort of calculation.
Short answer: no they don't.

Stay in the present time. Don't over complicate this. I would look at your total FERS contribution on your last leave and earnings statement and buy out her half. It's not perfect but its quick and easy. That, or ignore it all together since who knows what benefits will actually be there when you can claim them in 20+ years. Don't speculate about the future.

Topic Author
Gardener
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Re: Divorce- Help with Present Value Pension Calculation

Post by Gardener » Thu Aug 08, 2019 8:39 am

Quick follow up.

So, I did some digging and found that since working as fed employee:

I have paid in ~13.5k to the FERS retirement program
And the government has paid in ~36k on my behalf.

Is it fair to both of us if I paid half of what government and I have contributed? (i.e 13.5k + 36k = 49.5k / 2 = $24.75k) That sounds awfully high, but what do I know?

Or is it fair to both of us if I paid half of what just I have contributed? (i.e $13.5k /2 = $6.75k)

Or are neither of these fair?

I can also pay a professional to do this. A little reluctant to do so though, if I can figure out something roughly fair for ex wife and I.

Thanks

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Mlm
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Re: Divorce- Help with Present Value Pension Calculation

Post by Mlm » Thu Aug 08, 2019 9:02 am

I would use what you paid in or nothing. It's only four years which is pretty immaterial. Fair is whatever you both can agree to.

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sk2101
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Re: Divorce- Help with Present Value Pension Calculation

Post by sk2101 » Thu Aug 08, 2019 9:07 am

If you want to be 100% fair, you should find out what is the current balance on your pension account and split that in half. Your pension administrator is able to tell your that. I have a pension account managed by Fidelity and I can look that up online.

The reason being that your contributions are invested and should have grown to a larger amount by now. Also you want to make sure that the employer contributions information you are getting is correct, so the best source of information is to look at the balance.

ETA: I am assuming you have a defined contribution pension

chevca
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Re: Divorce- Help with Present Value Pension Calculation

Post by chevca » Thu Aug 08, 2019 12:28 pm

Gardener wrote:
Thu Aug 08, 2019 8:39 am
Quick follow up.

So, I did some digging and found that since working as fed employee:

I have paid in ~13.5k to the FERS retirement program
And the government has paid in ~36k on my behalf.

Is it fair to both of us if I paid half of what government and I have contributed? (i.e 13.5k + 36k = 49.5k / 2 = $24.75k) That sounds awfully high, but what do I know?

Or is it fair to both of us if I paid half of what just I have contributed? (i.e $13.5k /2 = $6.75k)

Or are neither of these fair?

I can also pay a professional to do this. A little reluctant to do so though, if I can figure out something roughly fair for ex wife and I.

Thanks
A. If you guys get along and trust each other financially, why are you in mediation? You should be able to do this on your own.

B. If there's $775 to be divided up outside this pension part, it's about silly, IMO, to get tripped up over the pension. This is chump change in the big picture. Ask her to leave retirements out if it, give her $10k, give her $20k. Who cares, really. Whatever you and her think is fair is what counts. We can't really answer this for you.

Are you even vested in the pension yet? Can you be certain you will get a pension at this point?

Sorry about your divorce. I've BTDT twice and is stinks no matter what. Neither of mine were very long marriages, < 5 and < 10 years respectively. We left pensions and retirement out of it for both. We were still young enough and hadn't been married long, so didn't feel either one had any claim to retirement monies still decades away. And, both of mine we walked away splitting debt. If you guys are walking away with almost $400k each and this is a sticking point... come on, y'all...

How long was the marriage? It seems like < 10 years? You guys are young, the marriage wasn't that long, and retirement is still a ways off for you both. Leave the retirement stuff out of the divorce, IMO. If she's being a stick in the mud about this pension thing, give her $10k extra out of the $775k and call it good. Get it over with and don't drag it out. Long drawn out divorces just make bad blood, or more bad blood between the two.

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BL
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Re: Divorce- Help with Present Value Pension Calculation

Post by BL » Thu Aug 08, 2019 1:14 pm

If it helps any, I don't think military 4 years should count because you weren't married then. You would just barely be vested with only 3 years fed. pension, right?

carmonkie
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Re: Divorce- Help with Present Value Pension Calculation

Post by carmonkie » Thu Aug 08, 2019 2:35 pm

What other assets are being split off? Is there a house? Cars? Does her car have a note?
Does she have a retirement 401(k).

When I split up, I paid off her car, about 3K left on the loan, plus 401(k) and the sale of the house. I am in Texas, came to marriage without anything so had to split everything 50/50.

Do you want to deal with her 30 years down the road if you do not leave your pension out of this? There is the possibility that you might go into private sector next year and you paid her based on Future Value. I would not count the government contributions. Those may have a vesting schedule anyway??
Offering 13.5K is only 1.7% of the total assets being divided, looks like offering a buyout of your contributions is a good plan and the simpler of all.

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