Financial Considerations and the Timing of DivorceA couple might want to consider the timing of their divorce based on circumstances and financial considerations. For example, one of the parties might have borrowed money against their retirement account, which reduces the total value of the fund. This, in turn, affects the final valuation of the marital estate. In addition, the timing of when property was acquired will affect the valuation as well. The timing could mean the difference between sharing the property or retaining independent ownership. For example, if a wife bought an heirloom engagement ring prior to the marriage, it would be considered personal property and separate from the joint assets. This also holds true for pension plans: Money deposited in the plan before marriage and possibly after separation will generally be separate from the marital property. An attorney can provide a client with more information on splitting pensions. 


Methods of Calculating Pension Division

Experts use different formulas in order to calculate how to divide a pension, and the parties might decide to rely on these to figure out a final result. A professional can help untangle these complicated calculations. One way might be to actually add all deposits into the account along with all interest earnings. Another approach uses the retirement work units for each period, but trying to calculate these amounts can confuse even experts. The most common method and one that is regularly used is to total the months of marriage, divide by how many months the person was employed and multiply that by the pension total. This yields the final marital portion. 

An example demonstrates how to plug in the numbers to complete the equation. The couple might have been married for 60 months and the husband was at his place of employment for 120 months. His IRA might be worth $50,000. In this example, the equation follows: 60 divided by 120 times $50,000, which equals $25,000. This should be shared equally between the partners, so the wife would receive $12,500. If you have questions about how to calculate the division of a pension, feel free to call our attorneys in Richmond or Williamsburg, Virginia at 804-325-1245 (Richmond), or 757-941-4298 (Williamsburg).