Your retirement plan is simple: You’re lucky enough to have a pension plan, and it’s going to pay you enough money to live comfortably. As such, rather than saving for retirement, you have put your earnings into things like paying off the house, paying down your debt and buying the assets you need. Your goal is to have everything in order so that your budget works when you retire and your income changes.
One unexpected issue that you now face, though, is that your spouse asked for a divorce. They want to end the marriage before you even retire. You’re close to retirement age — it’s a gray divorce, as the popular term puts it — so you want to make sure the divorce does not derail your plans.
You have two basic options. Don’t worry, there is a solution. You just need to know what steps to take.
Dividing the pension payments
The first option is to split up the monthly pension payments. You do this with a QDRO or a Qualified Domestic Relations Order. When the account pays out, a portion of it goes to your ex. The court looks at the pension as merely a marital asset. If you had all of the money in hand, you would divide it. Since you don’t, you divide each payment.
One thing to note is that the percentage is usually based on pension earnings during the marriage. If you earned part of the pension before and/or after your marriage, you don’t have to split that portion. For instance, if you earned half of the pension during your marriage, your spouse may get half of 50%, which is really just 25% of each check.
Another option is to use other assets to offset the value of the pension plan and essentially buy it back from your ex. This way, you get 100% of the payments and you can really cut ties, financially speaking, when you get divorced.
The key is to determine the value of the pension. Once you do, your spouse may accept other assets in exchange during the property division process.
For instance, perhaps your spouse really wants to keep the family home. If the two assets appear close enough in value, they may accept your half of the home in exchange for their half of the pension. One of you has to buy a new house after divorce anyway, and now you know that it’s you.
Property division can get complicated with high-value assets, retirement plans, investment portfolios and the like. Make sure you know exactly what legal steps you need to take in Ohio and all of the options you have.