You Said You Wouldn’t Touch My Pension!
So much emotion, negotiating and misinformation tied to pension assets. As a mediator, coach or in my role as a CDFA I regularly hear the statements below. Do they sound familiar to you?
It’s my pension, my husband didn’t contribute.
It’s not worth much, we don’t need to include it.
I don’t want to spend the money or time to get the Family Law Value.
It’s his pension, I don’t want to seem unfair.
When I hear a client tell me “I already said that I wouldn’t touch his/her pension” my first question is always “Do you know how much the pension is worth?” the second is “Would it change your decision if the pension was $20,000 or $500,000?”
I truly am pleased when clients can still communicate about these things and want to do what seems fair in their situation and within their family. However, there are important questions that need to be answered before the decision is made:
- Do you know what the law says about the pension and how it can be shared?
- Do you have a way to make up for those retirement funds?
- How close are you to retirement?
- What will you have to retire with?
- What are your retirement plans?
Here’s the thing clients forget; if they stayed together, they would both share in the benefits of that pension. That same “sharing” for lack of a better term applies during divorce.
We need to unpack decisions made outside of our processes in order to understand what the clients are trying to accomplish and why. As we strive to ensure balance in the decision-making process.
Let’s say a couple was married for 15 years and separates with one having a pension of $500,000 and the other an RRSP of $50,000. Does it seem fair that one of them can retire either earlier or with more retirement assets than the other based on the same 15-year partnership? The answer is maybe. It is subjective and based on the client’s sense of fairness.
- Maybe the couple kept their finances separate and made conscious decisions about retirement planning during the relationship.
- Maybe one person is a spender and the other a saver.
- Maybe one person is significantly younger and can make up the difference.
- Maybe one person got into unreasonable personal debt or had a hard time maintaining a steady income level to contribute.
- Maybe one person took money out of an RRSP to provide for extended family members.
- Maybe one person has access to other sources of funds such as a personal injury settlement or inheritance.
There are many reasons why retirement assets aren’t the same for each person and many reasons clients may want to negotiate an equalization that looks different from their legal entitlements and obligations.
Complete financial disclosure is the foundation for making informed decisions, as we know. I believe our role is to provide clients with the reason that complete financial disclosure is so important. Ask questions. Make it personal to them. To help clients have uncomfortable conversations that they didn’t know they needed to have.
It is our role not to change their minds but to open them.