Q. My wife and I worked hard for many years, she is a fifth grade teacher and I manage an automobile dealership.  We paid for our two children to go to college and our nest egg is not as large as we had hoped.  Now that we have decided to divorce, I am concerned neither of us will have much of a retirement lifestyle.

My wife wants to keep her pension and have me keep my 401(k). But, with the recent dip in the market I am really concerned about this idea.  I was talking this through with my brother and he told me not to discount my wife’s Social Security in our calculations.  I thought as a teacher she got a pension instead of Social Security.  Am I wrong?

A. The Social Security Fairness Act was signed into law shortly before the end of President Biden’s term. Check out the Social Security website for information on how you may be impacted by the change.  Individuals employed by the government in jobs which were not covered by Social Security previously could not collect Social Security upon retirement because of the offset of their public pension against Social Security to prevent a windfall.

The windfall provision was eliminated effective Jan. 1, 2025 so, as this column is being written, the Social Security administration is working on calculating back payments to those who fall into this category.

Not all teachers, police, firefighters or other government workers will fall into this category.  You need to determine whether your wife’s teaching position is considered a “non-Social Security covered” teaching position.  If it is, she will be entitled to both her pension and Social Security upon her retirement.  It should be easy enough to determine whether her position is “covered” or not because individuals who pay into Social Security see their contributions listed on their paystubs.

Assuming your wife falls into this “non-Social Security covered” category, you should make three buckets of retirement income streams in order to equalize post-tax retirement income. First, determine what you will each receive in Social Security income once you retire and begin to collect.  Next equally divide your 401(k) through the date of divorce together with gains and losses to the date of division.  Finally, divide the marital portion of your wife’s pension in such a way to equalize your incomes.

Email questions to whickey@brickjones.com