Early Retirement Subsidies – A Fair Share of the Pension

Approaching the so-called Golden Years, many couples dream of the prospect of taking early retirement without drastic reductions in the benefits. Many pension plans offer early retirement incentives to eliminate older workers who have peaked and replace them with younger, less expensive employees. Care must be taken, however, if the early retirement subsidies and supplements become an issue in a divorce.

The alternate payee (or nonparticipant), and the participant, who is the worker, may be counting on the early retirement subsidies. However, many nonparticipants mistakenly believe they have a right to the enhanced benefits even if the participant stays on the job. The worker who stays on the job can walk away when he or she retires at a normal age (usually 65) while the spouse who took reduced benefits early struggles with a much smaller share of the pie. Some actuaries warn that the alternate payee should not retire before the participant “for fear of losing a larger share of the ultimate pension” – the one that lasts a lifetime.

Some plans permit payments to the alternate payee on or after the participant’s earliest possible retirement, even when the participant has not retired, but the alternate payee runs a risk if he or she retires before the participant. The alternate payee’s retirement before the participant “can sometimes lead to the ultimate loss of all early retirement benefit.”


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