Question: My husband retired from one job, went to work for the government, and is about to retire again at 65. Now, after 43 years of marriage, he decided that he does not want to live with me any more and has moved out. We have accumulated our home (which is paid for), savings, and annuities. I am 63 and have never worked outside the home. I have been reading your column for years and would like to know your suggestions about the best way to deal with the retirements and our other assets?

Answer: Retirement benefits have replaced the marital home as the most valuable financial asset in many marriages for those over age 40 who are divorcing. Because of a rash of recent requests for information about retirement and divorce, this and our next column will cover some of the basics, but REMEMBER: Dealing with retirement issues at divorce is very complex and requires advance planning with a knowledgeable lawyer and certified public accountant or actuary.

Divorcing couples can take two basic approaches to dividing marital assets that include retirement benefits, but each approach requires that all assets be valued: 1) Award the non-employed spouse a combination of marital assets equal in value to the retirement benefits and leave the employee spouse with retirement benefits; or 2) Divide the retirement accounts by actually assigning part of the retirement benefits to the non-earning spouse, and then split the remaining assets equitably.

The first alternative is essentially a trade-off in which the spouse who actually earned the retirement benefits retains them, and the non-earner spouse receives other assets of approximately equal value as an offset.

The second alternative will depend upon the type of retirement benefits that are going to be valued and divided. There are two basic kinds of retirement plans: 1) "defined contribution plans" and 2) "defined benefit plans". Here you will be dealing with both types of plans.

"Defined contribution plans" --- which include 410(k), profit sharing plans, money purchase plans, etc. -- provide each participant with one or more separate accounts into which the employee and/or the employer (depending on the plan) makes contributions each year at a specified rate. These contributions are invested in anticipation that the accounts will grow during the employee's working years so that, at retirement, the employee will be able to choose between a retirement annuity or a lump sum that will carry him or her through retirement.

Because the present value of an employee's future retirement benefit under a defined contribution plan as of a certain date is the current account balance, generally speaking, there is no need for an actuarial valuation.

On the other hand, "defined benefit plans" - which include many governmental plans -- are more complicated to value since these plans do not segregate each employee into separate accounts. Instead, these plans commingle the contributions and promise to pay a retiring employee a specific benefit after retirement for the rest of the employee's life. The amount of the benefit is generally expressed as a specified percentage of the employee's average pay for a period of years prior to retirement and takes into consideration the length of employment.

Since all employees' future benefits are commingled and since these benefits are paid in a stream of payments to the retiring employee, it is necessary to determine the present value of these future payments which is an actuarial computation.

The concept of "present value" is used to convert a stream of known future payments into a current lump sum that can be divided.

NEXT WEEK: How to avoid valuation and how to divide retirement benefits at divorce.