How to Calculate the Value of a Pension Plan in a Divorce

Pension plans can be the most complicate asset to divide in a divorce

Pension plans may be the most valuable asset a couple has in a divorce, as well as the most difficult to value, according to a report by the Judicial Branch of California. The same report recommends that couples with a pension plan who are getting divorced hire a lawyer who understands the special rules that apply to pensions in a divorce settlement. However, if you want to calculate the value of your pension plan in a divorce, there are general principles that apply to most pension plans.


Step 1

Determine if your pension is a defined benefit plan, in which you're guaranteed a monthly benefit when you reach retirement age, or a defined contribution plan, in which the value of the pension plan depends on the performance of an investment fund. If your pension plan is a defined contribution plan, calculating its value is simple: Call or email the company managing the fund and request the current account value. If your pension plan is a defined benefit plan, continue with Step 2.


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Step 2

Estimate your life expectancy. The value of a defined benefit plan depends on how long you'll receive benefits once you retire. Visit the Vital Statistics of the United States page on the Centers for Disease Control and Prevention website.

Step 3

Deduct retirement age from your life expectancy. Multiply the result by your guaranteed annual benefits when you pension fund matures. This is an estimate of the lump-sum value of your pension fund.


Step 4

Calculate a discount rate to determine the current-day value of your pension plan. There's no set formula to calculate a discount ratio for a pension fund. The discount rate you use must take into account the greater value of money today as opposed to receiving it at a future date, as well as the probability of you dying before you reach retirement age.



Step 5

Multiply the total lump sum of your pension plan by the discount rate you and your spouse agreed on. This is the current value of your pension plan.


When calculating your estimated life expectancy with the Vital Statistics of the United States reports, check the life expectancy of a person of your gender at your current age. This is because the statistical life expectancy of a person is much lower at birth than when you estimate it later — say, at 30. Only take into consideration the life expectancy of people who have already reached that age.



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