How Much is a Retirement Plan Really Worth?

A Richmond Child Custody Lawyer

How much will a retirement plan really be worth? Pension valuations are often a top concern for divorcing couples. Involving an expert ensures a balanced opinion on the fair division of assets.

Find a Pension Valuation Expert

This expert needs to know local requirements for pension valuations. If the expert is working on behalf of both you and your spouse, your attorney should tell him or her to report how alternative assumptions (for example, if you retire at age seventy instead of sixty) will affect the valuation. It should be noted that such matters can complicate the divorce process, so it is important to have as clear an understanding as possible of the values based on such alternative assumptions.

Information is Key

It is of the utmost importance that you provide the necessary information to the valuator. Otherwise, he or she is unlikely to generate an accurate report regarding your marital estate. There are several factors that financial experts and valuators will look at when determining the value of a pension or retirement plan, such as the retiree’s date of birth, gender, race, date of hire and date terminated (if applicable), amount of monthly pension benefit, retirement date, and discount rate.


Date of retirement

The value of a pension plan will be affected by the person’s retirement date. For instance, the value of a pension plan will increase if the person chooses an early retirement date because the retiree will receive pension payments for a longer time-span. 

If the retiree is getting a divorce, this could impact the value of the pension. For example, a man who is getting divorced might delay his retirement date due to the financial setbacks caused by the divorce. A delay in a person’s retirement date might reduce the pension’s value.

Some employers set specific retirement ages such as 65. Others set earlier dates, such as age 50, if the work is physically demanding such as fire and police departments. If no specific date has been set, an expert may take an average based on statistics to come up with an assumed retirement date.


Date of birth

Another factor an expert will look at is the retiree’s date of birth. This will tell the expert what age the person is at the time that the evaluation is made and when he or she is likely to retire. This will help the expert to determine the how long the retiree is expected to live. The anticipated life span of the individual will help the expert to determine the anticipated number of payments and the overall value of the retirement account.
 

Discount Rate


The discount rate is another factor that affects the value of a retirement account. The discount rate can be estimated by evaluating historical and current interest federal investment rates like treasury securities. The lower the rate, the more valuable the account will be.


Other factors

There are other factors that can affect a retirement account’s value such as the date the person was hired, his or her race and gender. Longevity tables take these factors into account since certain races tend to have longer life spans than others and women tend to have longer life spans than men.

If the account is being evaluated as part of a divorce, an expert may look at the date the couple was married and the date that they separated to divide the marital portion of the retirement account from the non-marital portion.