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What should I know about dividing pensions in divorce?

On Behalf of | Oct 7, 2022 | Divorce

If you are about to divorce, you should understand the types of assets that you might have some entitlement to. Any pension your wife or husband owns is one example. Dividing the pension between you and your spouse could yield you enough proceeds to build a good retirement.

Still, there is no guarantee that you will receive what you expect from your spouse’s pension or that you will even get anything. Kiplinger explains some key facts about pensions when it comes to a divorce.

Not all pension money is divisible

Divorces divide up marital property, and pensions are no exception. If your spouse has earned a pension during your marriage, you may pursue a share of it. By contrast, a pension earned before you and your spouse got married is likely separate property that your spouse will keep.

Pensions have estimated payments

You may want to take a closer look at your spouse’s recent pension statement. The amount on the statement is probably an estimated payment, which means the pension is projecting an amount the pension will earn in the future. However, the actual amount the pension pays out could be either higher or lower than the estimate.

The pension provider may be unstable

You will probably have nothing to worry about if your spouse gets a pension from the state or federal government. It may be another matter if the pension provider is a private company. In the event the business is in financial trouble it could file for bankruptcy. You might receive far less than you expect or perhaps nothing at all if the company goes into liquidation.

It is important to factor in any uncertainties about receiving pension money in your divorce settlement. You might negotiate for more stable assets instead of a pension share. Your spouse could find this a more acceptable alternative if he or she wants to keep the pension undivided.