Divorce and FERS- will you really not remarry?

[Anonymous]

Anonymous wrote:Bad breakup, she cheated. I would never pay a dime to an ex who has another man to support her. That’s his job. If she wants both his company and my money, that says something bad about her. She should try to get what is due her up front, and make a clean break. I’d leave the country rather than pay monthly while some other guy sleeps where I used to. I’d mislead the government to prevent it from paying her my money. (Kids, that’s different.)

Good luck with that. You'd have to manufacture evidence your ex had remarried. Then, your pension would go into your canteen account in prison.

[Anonymous]

Anonymous wrote:I don't recall how the marital portion of FERS works, but it could be that the reason your attorney looked at you funny is because whatever your ex would be willing to trade it for is worth significantly less than what you'd get if you didn't remarry and both of your lived an average number of years past retirement. I doubt your ex would trade it for lump sum of 200K.

Nor should he as the present value of the asset is going to be much less than $200K if her share is only $800 per month.

The far better question is whether your eligibility for part of the pension includes an eligibility for healthcare. I wouldn't think so but I would check. If not, just run a NPV analysis and figure out how much it is worth and make a clean break.

[Anonymous]

Yes, you should trade it for something else. Chances are the govt will renege on FERS, and the most unfair and expensive part of FERS to the American taxpayer are the spousal, survivor, and ex-spousal benefits.

What is that FERS worth today? Let's assume your ex retired at 70 and you begin receiving $800/month at age 70, and your ex lives for 10 years. That stream of monthly payments, at a 3 percent annual interest rate, is worth about $111,000.

But you have to wait 30 years to get those payments. So what is the discounted (today, using a 3 percent interest rate) value of the $111,000 in the future? About $46,000 today.

Want to use a different interest rate? Try 10 percent. The future flow of payments is larger--$164,000 from age 70-80, but the present value is even lower--$9,400.

In other words, if you want $800 a month from ages 70-80, invest $9,400 today at 10 percent interest. That's what FERS is really worth.

In my case, ex doesn't get FERS until I retire. I'm never going to retire. Even if I did eventually retire, the FERS payments stop anyway the day I die.

[Anonymous]

I wish my ex had been smart enough to take a lump sum rather than fouling up my FERS account.

A friend retired in January. it was November of that year before OPM knew how much he should get and his ex should get from a divorce 20 years earlier. So his first 11 months of retirement FERS only sent him a small monthly check, and his ex nothing.

[Anonymous]

Just be like Hulk Hogan's wife and have a 20 year old house boy while cashing the checks.

[Anonymous]

Anonymous wrote:Yes, you should trade it for something else. Chances are the govt will renege on FERS, and the most unfair and expensive part of FERS to the American taxpayer are the spousal, survivor, and ex-spousal benefits.

What is that FERS worth today? Let's assume your ex retired at 70 and you begin receiving $800/month at age 70, and your ex lives for 10 years. That stream of monthly payments, at a 3 percent annual interest rate, is worth about $111,000.

But you have to wait 30 years to get those payments. So what is the discounted (today, using a 3 percent interest rate) value of the $111,000 in the future? About $46,000 today.

Want to use a different interest rate? Try 10 percent. The future flow of payments is larger--$164,000 from age 70-80, but the present value is even lower--$9,400.

In other words, if you want $800 a month from ages 70-80, invest $9,400 today at 10 percent interest. That's what FERS is really worth.

In my case, ex doesn't get FERS until I retire. I'm never going to retire. Even if I did eventually retire, the FERS payments stop anyway the day I die.

Very, very few people wait until age 70 to claim their pensions. Not saying that’s right, but it’s a fact. In fact, if your family dies young and your health isn’t great, it would be dumb to wait until age 70 if you want to maximize lifetime pension income.

So these calcs should look at a longer payment stream, from say age 65, and the discounting would start at a younger age.

10% is way too high a discount rate in this current interest rate environment.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Yes, you should trade it for something else. Chances are the govt will renege on FERS, and the most unfair and expensive part of FERS to the American taxpayer are the spousal, survivor, and ex-spousal benefits.

What is that FERS worth today? Let's assume your ex retired at 70 and you begin receiving $800/month at age 70, and your ex lives for 10 years. That stream of monthly payments, at a 3 percent annual interest rate, is worth about $111,000.

But you have to wait 30 years to get those payments. So what is the discounted (today, using a 3 percent interest rate) value of the $111,000 in the future? About $46,000 today.

Want to use a different interest rate? Try 10 percent. The future flow of payments is larger--$164,000 from age 70-80, but the present value is even lower--$9,400.

In other words, if you want $800 a month from ages 70-80, invest $9,400 today at 10 percent interest. That's what FERS is really worth.

In my case, ex doesn't get FERS until I retire. I'm never going to retire. Even if I did eventually retire, the FERS payments stop anyway the day I die.

Very, very few people wait until age 70 to claim their pensions. Not saying that’s right, but it’s a fact. In fact, if your family dies young and your health isn’t great, it would be dumb to wait until age 70 if you want to maximize lifetime pension income.

So these calcs should look at a longer payment stream, from say age 65, and the discounting would start at a younger age.

10% is way too high a discount rate in this current interest rate environment.

PS. Also, average life expectancy at age 65 is, what, 86 or 88—not 80. Not sure what life expectancy is for a 30- or 40-year-old, but even life expectancy at birth for the cohort who are that age now is a lot higher than 80.

So really, the income stream will be a lot longer than 10 years. If the XDH retires at 65 and dies at 85, that’s 20 years of pension payments. This doesn’t translate directly into doubling your DPVs because the timing of payments is different. But given that the discounting starts at a younger age, DPV should be more than twice what you suggest.

Hope you didn’t persuade an ex-spouse to go along with your calculations.

[Anonymous]

Anonymous wrote:I wish my ex had been smart enough to take a lump sum rather than fouling up my FERS account.

A friend retired in January. it was November of that year before OPM knew how much he should get and his ex should get from a divorce 20 years earlier. So his first 11 months of retirement FERS only sent him a small monthly check, and his ex nothing.

Don’t take a lump sum unless you know for sure you have the self-control not to blow it in 5 years and you understand how to invest it wisely. (Hint: while I’m a proponent of staying in stocks through retirement, nobody in retirement should be seeking out risky investments that might return 10% a year.)

[Anonymous]

Anonymous wrote:

Very, very few people wait until age 70 to claim their pensions. Not saying that’s right, but it’s a fact. In fact, if your family dies young and your health isn’t great, it would be dumb to wait until age 70 if you want to maximize lifetime pension income.

So these calcs should look at a longer payment stream, from say age 65, and the discounting would start at a younger age.

10% is way too high a discount rate in this current interest rate environment.

Many of those who retire at 65 have a spouse who also has income and savings, and who also wants to retire. I don't have such a spouse, so I will work until I am very old.

I work with several older people who are still working full-time, and they are in their 70s. I have many family members who worked until 70-75 and many of them lived into their mid and late 90s.

I also presented the calculations with a 3 percent discount rate. What other discount rates would you like?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yes, you should trade it for something else. Chances are the govt will renege on FERS, and the most unfair and expensive part of FERS to the American taxpayer are the spousal, survivor, and ex-spousal benefits.

What is that FERS worth today? Let's assume your ex retired at 70 and you begin receiving $800/month at age 70, and your ex lives for 10 years. That stream of monthly payments, at a 3 percent annual interest rate, is worth about $111,000.

But you have to wait 30 years to get those payments. So what is the discounted (today, using a 3 percent interest rate) value of the $111,000 in the future? About $46,000 today.

Want to use a different interest rate? Try 10 percent. The future flow of payments is larger--$164,000 from age 70-80, but the present value is even lower--$9,400.

In other words, if you want $800 a month from ages 70-80, invest $9,400 today at 10 percent interest. That's what FERS is really worth.

In my case, ex doesn't get FERS until I retire. I'm never going to retire. Even if I did eventually retire, the FERS payments stop anyway the day I die.

Very, very few people wait until age 70 to claim their pensions. Not saying that’s right, but it’s a fact. In fact, if your family dies young and your health isn’t great, it would be dumb to wait until age 70 if you want to maximize lifetime pension income.

So these calcs should look at a longer payment stream, from say age 65, and the discounting would start at a younger age.

10% is way too high a discount rate in this current interest rate environment.

PS. Also, average life expectancy at age 65 is, what, 86 or 88—not 80. Not sure what life expectancy is for a 30- or 40-year-old, but even life expectancy at birth for the cohort who are that age now is a lot higher than 80.

So really, the income stream will be a lot longer than 10 years. If the XDH retires at 65 and dies at 85, that’s 20 years of pension payments. This doesn’t translate directly into doubling your DPVs because the timing of payments is different. But given that the discounting starts at a younger age, DPV should be more than twice what you suggest.

Hope you didn’t persuade an ex-spouse to go along with your calculations.

Life expectancy (according to ssa.gov) for a 40-year-old American male today is 38.54 additional years (78.54 years total). Life expectancy for a 65-year-old American male today is 17.88 additional years (82.88 years total). Didn't OP say she was 40?

None of these numbers take into account that divorced men have a higher mortality rate, and resulting lower life expectancy.

Life expectancy for an American male born today is 76.15 years (versus an American female, 80.97 years), in other words, almost 5 years difference.

I understand that FERS payments to a divorced woman stop when her ex-husband dies. Taking and investing a lump sum is a better idea than relying on future payments which are not guaranteed by a government which may not even be around, and get cancelled the day the payer dies.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Very, very few people wait until age 70 to claim their pensions. Not saying that’s right, but it’s a fact. In fact, if your family dies young and your health isn’t great, it would be dumb to wait until age 70 if you want to maximize lifetime pension income.

So these calcs should look at a longer payment stream, from say age 65, and the discounting would start at a younger age.

10% is way too high a discount rate in this current interest rate environment.

Many of those who retire at 65 have a spouse who also has income and savings, and who also wants to retire. I don't have such a spouse, so I will work until I am very old.

I work with several older people who are still working full-time, and they are in their 70s. I have many family members who worked until 70-75 and many of them lived into their mid and late 90s.

I also presented the calculations with a 3 percent discount rate. What other discount rates would you like?


Anecdata about your coworkers doesn’t help us understand the population. The fact is that over half of people retire and claim Social Security by around 63 or 64, and a large percentage is retired by 65 or 66.

The 3% discount rate is OK. But you end up citing the $9k figure that results from the 10% discount rate, and that’s irrelevant in this interest rate environment.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yes, you should trade it for something else. Chances are the govt will renege on FERS, and the most unfair and expensive part of FERS to the American taxpayer are the spousal, survivor, and ex-spousal benefits.

What is that FERS worth today? Let's assume your ex retired at 70 and you begin receiving $800/month at age 70, and your ex lives for 10 years. That stream of monthly payments, at a 3 percent annual interest rate, is worth about $111,000.

But you have to wait 30 years to get those payments. So what is the discounted (today, using a 3 percent interest rate) value of the $111,000 in the future? About $46,000 today.

Want to use a different interest rate? Try 10 percent. The future flow of payments is larger--$164,000 from age 70-80, but the present value is even lower--$9,400.

In other words, if you want $800 a month from ages 70-80, invest $9,400 today at 10 percent interest. That's what FERS is really worth.

In my case, ex doesn't get FERS until I retire. I'm never going to retire. Even if I did eventually retire, the FERS payments stop anyway the day I die.

Very, very few people wait until age 70 to claim their pensions. Not saying that’s right, but it’s a fact. In fact, if your family dies young and your health isn’t great, it would be dumb to wait until age 70 if you want to maximize lifetime pension income.

So these calcs should look at a longer payment stream, from say age 65, and the discounting would start at a younger age.

10% is way too high a discount rate in this current interest rate environment.

PS. Also, average life expectancy at age 65 is, what, 86 or 88—not 80. Not sure what life expectancy is for a 30- or 40-year-old, but even life expectancy at birth for the cohort who are that age now is a lot higher than 80.

So really, the income stream will be a lot longer than 10 years. If the XDH retires at 65 and dies at 85, that’s 20 years of pension payments. This doesn’t translate directly into doubling your DPVs because the timing of payments is different. But given that the discounting starts at a younger age, DPV should be more than twice what you suggest.

Hope you didn’t persuade an ex-spouse to go along with your calculations.

Life expectancy (according to ssa.gov) for a 40-year-old American male today is 38.54 additional years (78.54 years total). Life expectancy for a 65-year-old American male today is 17.88 additional years (82.88 years total). Didn't OP say she was 40?

None of these numbers take into account that divorced men have a higher mortality rate, and resulting lower life expectancy.

Life expectancy for an American male born today is 76.15 years (versus an American female, 80.97 years), in other words, almost 5 years difference.

I understand that FERS payments to a divorced woman stop when her ex-husband dies. Taking and investing a lump sum is a better idea than relying on future payments which are not guaranteed by a government which may not even be around, and get cancelled the day the payer dies.

Still, 83 is higher than 80. And the same SSA website you’re quoting says (2017 Annual Statistical Supplement) that just 122k of 2.9M new claimants in 2016 were 70 or over.

I don’t disagree with the lump sum idea. I just don’t think it’s as cheap as you make it out to be. And that may make it harder for divorce(e)s to buy out the ex-spouse.

[Anonymous]

OP, you would have done better to post this in the Money and Finances forum. You'd get more personal finance answers and fewer relationship answers.

[Anonymous]

Anonymous wrote:OP, you would have done better to post this in the Money and Finances forum. You'd get more personal finance answers and fewer relationship answers.

Seems like “will you really not remarry” is a relationship question not a personal finance question. The discussion of whether to buy your spouse out (in which I participated by challenging the $9k figure) seems like more of a sidetrack.

[Anonymous]

Anonymous wrote:I’m looking over my draft separation agreement and all this stuff from OPM and I’ll get about $800 a month via e-DHs FERS retirement thought my marital portion. But I’m not even 40... and I would need to wait until after 55 to remarry to be eligible for it. I don’t have a crystal ball, but..... seems like something I’ll never see. I told my lawyer I should trade something for it but she looked at me funny and said I was entitled to it. And I’m being pretty reasonable with everything else (50/50). Do people really take this and wait until 55 to remarry?

I traded a lump sum cash for retirement benefits. I’ve been remarried 11 years.