Divorce decisions include nest egg

Splitting from a spouse? It may be painful, but don't forget the long-term view.

Getting your retirement nest egg through a divorce takes more time, patience and short-term cash than many people can muster during such a traumatic period.

Often, this leaves them vulnerable to problems down the road, said financial planners who cater to divorcing couples. And when the split happens near retirement, it can be particularly painful.

"A lot of people [at or near retirement] just stay in unhappy marriages because the economics are more than they can contemplate. They look at what they've built, which often isn't as much as they'd hoped, and then divide that by two, and it isn't enough," said Jamie Lapin, a Rockville planner with Risk Management Group Inc.

Take care of the here and now through alimony and child support, but value your marital assets smartly so you can salvage, not sabotage, your golden years, experts said.

A few tips:

Learn the lingo.

How you and your spouse divide the workplace retirement accounts needs to be spelled out in a qualified domestic-relations order, which documents who is paying alimony and child support and how much, as well as how marital property will be divided.

But the rules surrounding these orders can vary, depending on how the plan is organized.

Know your benefits.

Some company retirement plans are structured in a way that prevents anyone from withdrawing funds until a certain age, despite what a divorce decree says, Lapin said.

Focus on values.

Amicable splits usually cost less, but there are times when just dividing up assets yourselves isn't wise and it's best to hire an actuary to put a present value on your nest egg. A simple evaluation might cost about $500, but more complex cases could be several times higher, said Mark Altschuler, president of Pension Analysis Consultants in Elkins Park, Pa.

You probably can skip this step if you have relatively low-balance, defined-contribution plans that were earned entirely during the marriage, he said, and not too much time has passed since you technically split into two households. The value of marital property can fluctuate greatly if the process spans several years, and state law varies as to when the marital property period ends.

If necessary, ask your attorney or financial planner to recommend an actuary.

When your ex is a federal government employee.

Be sure your attorney uses the language for divorce decrees that conforms to the standards of the U.S. Office of Personnel Management, said Tammy Flanagan, senior benefits director for the National Institute of Transition Planning Inc., a private company that works with government employees on retirement issues.

Remember your health.

Within government plans, an ex-spouse who takes other assets in a settlement and gives up access to the retirement plan also loses access to the health plan, Flanagan said. Private employer rules on health plans vary, so it pays to check early.

Don't forget Social Security.

Many couples are unaware that former spouses typically are eligible for Social Security spousal benefits if the marriage lasted at least 10 years, even if the higher earner remarries, said Stacy Francis, co-founder of the New York chapter of the Association of Divorce Financial Planners Inc.

"I've had people call me who've been married nine years, and [once they hear this] they decide to wait a little longer" to divorce, said Francis, also president of Francis Financial Inc.

"Divorce planning is very much a dance between long-term assets and liquid accounts, and when people are in survival mode, the long-term perspective can get lost."

[e-mail]

Janet Kidd Stewart writes for Tribune Media Services.