Teachers hold a special place in my heart for many reasons. For one, early in my career, I was a teacher. I earned my Master's in Education and have made quite a few teacher friends over the years. Additionally, I had the pleasure of having some fabulous teachers throughout my education. My children have also been blessed with some wonderful teachers who truly care about their success.
Often, when I meet with teachers who are faced with the end of their marriage, they realize that they do not have a complete understanding of the family finances and their retirement benefits, in particular. Many do not even realize that they have options when it comes to their pensions. Teachers, you are not alone! It is my passion to provide the education you need to feel empowered as you go through your divorce.
Public school teachers in the State of Ohio receive retirement benefits from the State Teachers Retirement System (STRS). So, what happens to your pension if you decide to terminate your marriage? It depends on all of the assets that will be divided. If you are dividing other assets, you may find that it makes sense to offset your pension with other assets so as to keep your pension intact.
The best way to negotiate offsets is to get your pension valued. It's important to recognize that the value of your pension is not equal to what is on your most recent statement. Rather, that value represents the cash contributions to your pension funds. There are various ways to value a pension but I'll spare you from the details. The point is that you should have an expert value your pension so you can make an educated decision when you negotiate offsetting your pension with other assets.
Related post: How to Keep Your Pension in a Divorce
Related post: Valuing a Pension is a Wise Investment
Keep in mind that if you are contributing to a public pension plan such as STRS, you are not contributing to social security. If your spouse is working for a company that does not have a public pension then s/he is contributing to social security. Social security cannot be divided as an asset in a divorce. However, in many states (including Ohio), it can be evaluated to determine how much of a pension should be divided for it to be an equitable division.
For example, in very round numbers, let's say one spouse is receiving $3000 monthly from their STRS pension when they retire and the other spouse will collect $2000 from social security. Since the teacher collecting the STRS pension will not receive a social security benefit then it might make sense to only look at dividing the $1000 difference ($3000-$2000=$1000). This is an incredibly simplistic example for illustrative purposes. Hopefully, it gets the point across as to why it's important to consider a social security offset when equitably dividing a public pension.
If you do decide to divide your pension as part of your separation agreement, you will need to have a Divison of Property Order (DOPO) drafted and signed by the judge. The DOPO tells the pension plan how your pension will be divided per your separation agreement. Even though you are getting a dissolution, in Ohio, you will still need to make a court appearance. I encourage clients to have their Division of Property Orders (DOPO) completed prior to going to court. That way, you can have the judge sign off it while you are there and you won't have to worry about it after the fact.
Do you do your own dental checkups, fix your own car, and teach a classroom full of kids? More power to you, if you do! However, most of us have education and experience in certain areas and leave the rest to professionals who are knowledgeable in areas where we are not. It can be tempting to go through your divorce, cutting corners where you can. Remember, you only have one chance to get it right. If you have financial questions, have a financial expert on your team who will provide you with the support you need. Let someone take care of you for a change.