Divorce and FERS- will you really not remarry?

[Anonymous]

You should “always take the lump sum” rather than the annuity.

[Anonymous]

FERS doesn’t necessarily end when the ex-spouse employee dies. You can get survivorship, I had that written in to my divorce decree. I’m in the same boat as the OP though. 44 years old, owed about $750/ month at retirement. I’m debating whether to take a buyout now and be done with it. Psychologically I’d rather have a clean break.

[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.

I agree that trading it for something now makes sense.

However, as to the bolded, where might one find such a unicorn? I'd happily invest there . . .

[Anonymous]

OP: I thought I posted this earlier. Must not have gone through. Huh. Thank you everyone for posting. This has been very informative. I was asking more about the relationship side but the financial info is helpful. I brought this up in mediation and he’s a flat no to trading anything of substantial value. So it’s a no go. Obviously I would be looking for NPV not $200k, but he said nope. I did learn that my stock grants are treated the same way with the marital portion, etc do I don’t have to flat out give him half of things which is cool. That’s a bonus.

[Anonymous]

OP, you're still young. Make your own life. Forget about the money and look for a decent man.

[Anonymous]

Anonymous wrote:You should “always take the lump sum” rather than the annuity.

Not necessarily true. Many people who take their pensions as lump sums when they leave an employer cash them out. And then owe taxes. You’ve probably seen the stories about the lottery winners who are now bankrupt—and the ones who invested wisely. If you blow it on that dream vacation + car, you’ll have a much worse retirement. Plus you take on market risk if you keep it as s lump sum, the risk that the market tanks just as you need to sell a huge chunk.

Pension annuities and Social Security actually offer something really valuable, which is a guaranteed income stream for life. Yes annuities can be over-priced, and you’d never want to annuities all your assets, and don’t get an annuity of you think you’ll die younger than average. But your X’s pension plan is probably well-managed (unless you think the company is going bankrupt...) and at low cost relative to plunking it all in an IRA and paying fees at the retail rate for an individual.

Take the lump sum if you’re confident in your ability to invest it wisely (get advice if you need it) and lock it away until retirement.

[Anonymous]

Anonymous wrote:OP, you're still young. Make your own life. Forget about the money and look for a decent man.

Or find happiness on your own.

[Anonymous]

I thought I would never remarry. When I had been with DH for four years and he said he wanted to get married, staying shacked up to hold onto retirement money from my ex never entered my mind. I was really focused on making sure this was not another mistake in choosing a husband. I suspect the same is true of most women who could remarry, but choose not to. The money is a polite way to cover uncertainty.

[Anonymous]

Anonymous wrote:FERS doesn’t necessarily end when the ex-spouse employee dies. You can get survivorship, I had that written in to my divorce decree. I’m in the same boat as the OP though. 44 years old, owed about $750/ month at retirement. I’m debating whether to take a buyout now and be done with it. Psychologically I’d rather have a clean break.

I would absolutely refuse to pay for survivorship. It lowers the pension by about one-third.

[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.

I agree that trading it for something now makes sense.

However, as to the bolded, where might one find such a unicorn? I'd happily invest there . . .

Original reply had a three percent calculation as well. You can also do your own calculations at 7 percent which would be a low average. My 403b has grown at an average of 8.25 percent over the last 25 years. Until this week my Vanguard IT EFT had a 20 percent growth rate over the past decade.

[Anonymous]

Anonymous wrote:

Anonymous wrote:FERS doesn’t necessarily end when the ex-spouse employee dies. You can get survivorship, I had that written in to my divorce decree. I’m in the same boat as the OP though. 44 years old, owed about $750/ month at retirement. I’m debating whether to take a buyout now and be done with it. Psychologically I’d rather have a clean break.

I would absolutely refuse to pay for survivorship. It lowers the pension by about one-third.

In many deals, like mine, the spouse seeking survivorship pays for it in the form of lower monthly benefits from the time the benefits start. Our settlement agreement states that each of us will decide to purchase survivorship benefits, or not, when the time comes to claim the pension. I think this is pretty standard.

[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.

I agree that trading it for something now makes sense.

However, as to the bolded, where might one find such a unicorn? I'd happily invest there . . .

Original reply had a three percent calculation as well. You can also do your own calculations at 7 percent which would be a low average. My 403b has grown at an average of 8.25 percent over the last 25 years. Until this week my Vanguard IT EFT had a 20 percent growth rate over the past decade.

8.25% < 10%. My Vanguard funds have been doing well too. But as they say, past performance is no guarantee, especially with the looming trade war. Wouldn’t want to hit retirement just as our economy tanks.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:FERS doesn’t necessarily end when the ex-spouse employee dies. You can get survivorship, I had that written in to my divorce decree. I’m in the same boat as the OP though. 44 years old, owed about $750/ month at retirement. I’m debating whether to take a buyout now and be done with it. Psychologically I’d rather have a clean break.

I would absolutely refuse to pay for survivorship. It lowers the pension by about one-third.

In many deals, like mine, the spouse seeking survivorship pays for it in the form of lower monthly benefits from the time the benefits start. Our settlement agreement states that each of us will decide to purchase survivorship benefits, or not, when the time comes to claim the pension. I think this is pretty standard.

My ex wasn’t so smart and wasn’t paying much attention because he wanted to get remarried right away so my divorce has him incurring the cost of the survivorship benefit. But I’m still thinking of renegotiating and being done with it.

[Anonymous]

Anonymous wrote:
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.

On your first point, SSA shows the life expectancy of a 40 year old as 78.54 years (we were talking about an OP who is 40 and will not be seeing a FERS check for 25-30 years). If her ex makes it to 65 and retires, he has a longer life expectancy. But he might not make it to retirement.

On the second point, we are talking about federal workers and not the general US civilian workforce. Many do work well past normal retirement, especially if they have had a portion of their retirement stolen from them.

[Anonymous]

Anonymous wrote:

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.)

Bad breakup, addicted husband left 13 year marriage and three kids.

I’ll happily take his checks while I bed a man in the bed and home we used to share.

Thanks!

Doesn't work that way, she will send Divorce Decree/agreement to OPM and it will be on file when you retire.
Its a criminal offense to lie on you Federal retirement forms.