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Old 01-30-2013, 04:03 PM   #21
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I'd be very interested if anyone has run the numbers and found an insurance policy to be a better 'deal' than the survivor options that your company pension offers.

I saw another comment about the age of the spouse - ours (and I assume most others) has adjustments for the spouse's age difference. A young surviving spouse taking survivor benefits will take a relatively bigger bite out of the pension that you get.

I will take a close look when the time comes (another 8 years for me), but I did a quick look, and it seemed obvious to me that my MegaCorp has no interest in making any one offering any better than another - they appear to just be basic life expectancy adjustments. An ins co would do this, and have to make a profit on it. I'd be surprised if a life ins product could be ahead (other than some idea of diversifying the income).

Since my pension is non-COLA, it won't buy much for DW if I pass in my mid-80s. But I also learned that I can delay my pension, just as one can delay SS. You have to call to get current % increases, as they can change each year, but it's another possible piece of the 'longevity ins' puzzle. If the markets do reasonably well in the next 8 years, I might be in a position to delay pension and SS.

-ERD50
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Old 01-30-2013, 04:25 PM   #22
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I had a couple of friends a few years back, go the life insurance path. But, I wonder if they had a flawed model to go by. They bought in terms of "this will be plenty of money to get by on" and an insurance person provided them the numbers. This pension plan is COLA'd too, so I question if that was factored in also. I went option 1 on my plan, being single, but I was tempted to take an approx. 300-400 cut to fund option 3 of 50% for my daughter who is still under 20. If I had died the day after I retired she could have immediately drawn a little under 38k with COLA for rest of her life.
But I decided against it as I plan on living a long time, and would miss out on the COLA gain from the lost money, and need to save more myself.
I am conservative by nature, but provided the pension is secure, I would take the seamless transition of the pension, and skip the stress of insurance issues, drawn down investment decisions, etc.
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Old 01-30-2013, 05:34 PM   #23
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Although I have a lot of respect for many posters here, this situation may be more complex than it would appear. It would advise you to consult a financial advisor with your husband.
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Old 01-31-2013, 02:29 PM   #24
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Although I have a lot of respect for many posters here, this situation may be more complex than it would appear. It would advise you to consult a financial advisor with your husband.
What complexities do you envision?

It's pretty straightforward to compare the cost of Life Insurance versus the reduction in the pension benefit for each level of survivor benefit. I'm also assuming (if not already mentioned) that the pension is non-COLA'd. That makes apples-apples with LI easier.

Assuming you compare to a solid rated ins co, I doubt an advisor could tell you anything useful regarding the relative security of a PBGC secured pension versus the ins co. Is there anything other than some straight arithmetic and some comparison quotes? That's what I plan to do when I get to that point. I'm having trouble picturing what I would ask or expect from any advisor.

And then we are always back to that chicken-egg issue when it comes to advisors. How do you know if the advisor knows what they are talking about?

-ERD50
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Old 01-31-2013, 03:44 PM   #25
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What complexities do you envision?

It's pretty straightforward to compare the cost of Life Insurance versus the reduction in the pension benefit for each level of survivor benefit. I'm also assuming (if not already mentioned) that the pension is non-COLA'd. That makes apples-apples with LI easier.

Assuming you compare to a solid rated ins co, I doubt an advisor could tell you anything useful regarding the relative security of a PBGC secured pension versus the ins co. Is there anything other than some straight arithmetic and some comparison quotes? That's what I plan to do when I get to that point. I'm having trouble picturing what I would ask or expect from any advisor.

And then we are always back to that chicken-egg issue when it comes to advisors. How do you know if the advisor knows what they are talking about?

-ERD50
+1. It seems to me that many of the folks posting here are sharper than many professional financial advisors.
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Old 01-31-2013, 07:12 PM   #26
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There may be matters such as estate planning for heirs, tax planning, time horizon being considered, etc. that we do not know from the OP's post. These matters may be better discussed with a financial professional.

Some people visit several architects before they decide how to build their house. Others go to different doctors to have a second opnion about similar symptoms. Why would you prevent the OP from benefiting from a third party, professional opinion ? There is no harm in asking.

My view only, and it is ok to disagree.

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What complexities do you envision?
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Old 01-31-2013, 07:26 PM   #27
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I want to thank everyone who put thought into this thread. The tips and reminders were really helpful- from remembering to consider the COLA(yes, it is), to ease of transition during a time of loss.

As I mentioned, this is not an issue that will leave me eating cat food in any case, we are well protected with life insurance, 2 homes, plans to downsize, and a more than adequate portfolio.

You all have been great, and being able to just watch the discussion and get input from this knowledgable group is priceless. While I will run the question by my accountant, DH is totally comfortable with kicking the annuity salesman to the curb,and we are back to our previous plan, 50% benefit to me. That will be plenty, and addresses the unlikely risk of early death. Later in the retirement, other financial supports are in place, belts and suspenders!

Again, thank you all, these are not decisions to take lightly, and we both must be comfortable. I tend to lead in these decisions, but DH must also understand and agree that we have chosen what works for us. There is no perfect solution anywhere, unless someone knows how to predict our date of death. That one pesky piece of information, would solve all the "when to take SS" and "should I pay off my mortgage" questions!

Best to all, Kitty.
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Old 01-31-2013, 07:51 PM   #28
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Based on generic life expectancy charts I have, you have 27 years expected versus your husband's 18 expected years. Those last 9 years with a cola pension would be very valuable. Since most pension plans pay out to the survivor without regard to the age of the spouse I would find it hard to believe that buying life insurance is the better deal for anyone other than the insurance salesman. For every one thousand per month you have a net present value in today's dollars of $108,000 for those additional 9 years over the life expectancy of your husband.

If you take the difference of your husband's pension of zero percent survivor vs 100 percent over 18 years, you will see what a good deal I believe this pension opportunity is. I am going to guess his pension with zero percent is around $3,000 per month and at 100% survivor paying @ $2,250 that translates to $750 *12* 18 = $162,000 net cost to equalize the pension versus a net present value of $108,000 * 2.25 = $243,000. Meaning on a net present value basis the 100% survivor would be $81,000 better than the 0% option.

I would not see how with all the actuarily favorable situation you are in insurance will do anything but eat into that $81,000 favorable value you have today.

Maybe you could somehow obtain $81,000 and give it to your husband to "buy" the pension annuity from him
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Old 01-31-2013, 08:06 PM   #29
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Taking it out of order -
Quote:
Originally Posted by obgyn65 View Post
My view only, and it is ok to disagree.
No problem, I don't disagree at all, these are valid viewpoints.


Quote:
Some people visit several architects before they decide how to build their house. Others go to different doctors to have a second opinion about similar symptoms. Why would you prevent the OP from benefiting from a third party, professional opinion ? There is no harm in asking.
Multiple opinions can be fine. The problem that many of us have seen with financial advisors, is that many are far more interested in their finances than yours. So yes, it can be harmful - you have to be well prepared to separate the wheat from the chaff.


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There may be matters such as estate planning for heirs, tax planning, time horizon being considered, etc. that we do not know from the OP's post. These matters may be better discussed with a financial professional.
OK, important considerations for a retiree. Offhand, I can't quite see where a choice between a pension spousal benefit option and an equivalent life insurance option would affect any of that - I saw it as one replacing the other. But I'll take a closer look in eight years. And as others have mentioned, I've gotten better info from this forum and other sources than any financial advisor I've talked to.

-ERD50
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Old 01-31-2013, 08:50 PM   #30
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Originally Posted by ERD50
Taking it out of order -

No problem, I don't disagree at all, these are valid viewpoints.

Multiple opinions can be fine. The problem that many of us have seen with financial advisors, is that many are far more interested in their finances than yours. So yes, it can be harmful - you have to be well prepared to separate the wheat from the chaff.

OK, important considerations for a retiree. Offhand, I can't quite see where a choice between a pension spousal benefit option and an equivalent life insurance option would affect any of that - I saw it as one replacing the other. But I'll take a closer look in eight years. And as others have mentioned, I've gotten better info from this forum and other sources than any financial advisor I've talked to.

-ERD50
I am sure there are some very good financial advisors...but my only experience with one makes me wonder. This "financial advisor" as he called himself (I thought of him as an annuity peddler) wasn't so hot. I explicitly told him for 5 years, I was going to run $10k a year through my 403b and transfer it yearly into my pension fund to buy years. He kept insisting I needed to put it the stock market, to make more money. I told him that the market is not for short term investing, and I wanted it only put in a money market fund. This period was over 2005-2009. Listening to him would have cost me $10k easy. Definitely work with true Financial Planners, not the insurance "Financial Advisors" would be my suggestion, based on my one encounter.
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Old 01-31-2013, 10:20 PM   #31
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Some of us are impressed with what architects can do. Financial planners? Not so much.
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Old 01-31-2013, 11:31 PM   #32
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+1 I would be wary of the sole life option, especially in your case since you are some much younger than DH. Since pension payments are generally designed to be actuarially equivalent, I think your relatively younger age would favor the joint life option. In other words, the joint life benefit likely assumes that you and DH are the same age but in your case you are significantly younger so the survivor option would be more beneficial.
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Old 01-31-2013, 11:42 PM   #33
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I would look to see how much permanent/whole life insurance (or 30 year term if DH could get it) the difference in the pension payments could buy and how much of a SPIA the death benefit would provide. If the monthly SPIA exceeds the difference in the payments then go for the sole life option. Otherwise, chose the survivor option.

Assume worst case, that DH gets hit by a beer truck shortly after the pension payments start, your receive the death benefit and use it to buy a SPIA. IIRC with some life policies the beneficiary can opt for a life annuity benefit rather than a lump sum so that might be a short-cut to consider.

Given the difference in your ages I doubt that the numbers will work. I'll need to do a similar analysis in a few years but DW is about my age so the dimensions will be different.

Also see http://www.post-journal.com/page/con...are-of-pension
and http://www.cbsnews.com/8301-505146_1...urance-agents/
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Old 02-01-2013, 12:08 AM   #34
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Assume worst case, that DH gets hit by a beer truck
Why,oh why must it be a beer truck? How about the proverbial bus?
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Old 02-01-2013, 12:17 AM   #35
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Doesn't a beer truck sound more interesting than a bus?
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