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How are pensions divided in divorces?

On Behalf of | Jul 30, 2021 | Divorce

There are different retirement accounts that people have in Long Island. The most popular types of retirement accounts that people have are 401(k)s and IRAs, but there are other options. One of those options is a pension. These types of retirement accounts are unique though in how they operate. There is not a balance that people have in the account. Instead there is a anticipated monthly benefit that people will receive when they retire. This monthly benefit generally increases the longer people work for the company or union.

Pensions are still retirement accounts though and are considered an asset that they own. This means that if people with pensions go through a divorce they will need to divide the pension like they do other assets. Most assets have a specific value though and if necessary funds can be transferred or property sold in order to divide it. People with pensions generally cannot take money from the pension until they begin receiving their monthly benefit after they retire.

Formula used to divide pensions

Dividing pensions in a divorce can be complicated as a result. Essentially the couple needs to divide a future benefit. There is a formula used to determine how that monthly benefit will be divided. The formula has a nominator which is the total number of years the worker contributed to the pension during the marriage divided by a denominator which is the total number of years the worker contributed to the pension during their career. That number is then multiplied by 50% to determine the non-worker spouse’s portion of the monthly benefit upon retirement.

Pensions may not be the most popular type of retirement account, but many people living in Long Island still have pensions. These will be divided like any other asset if the person ever goes through a divorce. The division of a pension is just one part of property division in a divorce though. These can be complicated matters and consulting with experienced attorneys could be beneficial.