Knowing exactly what benefits you are entitled to in retirement is not always a simple thing, especially when there is a divorce involved. Nevertheless, knowing what income you’ll have in retirement is key to knowing if you can afford to retire.
But before I get too deep into this topic, here are a few disclaimers. Every divorce is different and every divorce decree has different language in it. I am not a lawyer and am not in the business of writing or interpreting divorce decrees. OPM will be the only opinion about your divorce decree that will actually matter.
That being said, as a financial planner for FERS employees, I can share some common situations that I have seen.
Like I mentioned above, I don’t know what sort of agreement you came to with your ex-spouse, but here is one that I see pretty often.
This situation is where the non-federal employee spouse gets 50% of whatever pension you earned while married.
For example, let’s say you had a career of 30 years, 20 of which you were married. If you had a high-3 of $100,000 and a multiplier of 1%, your gross annual pension calculation would look like this:
30 x $100,000 x 1%
Your Gross Annual Pension
However, your ex-spouse will receive half of what you earned during the 20 years you were together. This could be calculated like this:
(20 years / 30 years) x 50% x $30,000
Your Ex-Spouse’s Benefit
Under this situation, you would be left with a gross pension of $20,000 per year or about $1,666 per month. At this point you’d want to subtract your deductions to get your net monthly pension. This could look something like this:
Gross Monthly Pension: $1,666
FEHB Premiums: $200
Net Monthly Pension: $1,316
Note: If you are remarried and would like to provide a new spouse a survivor benefit, you’ll want to deduct that out of your gross pension as well.
But like I said, just because this situation is common, that doesn’t mean it will apply to you. Some decrees split pensions exactly 50% without consideration for how long you were married. Some couples negotiate home equity in exchange for keeping their entire pension.
Regardless of how long ago your divorce was, make sure you know exactly what it means for your retirement. With any type of planning, knowing the facts can make all the difference in being prepared for the future.