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Old 05-31-2014, 04:12 PM   #21
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Originally Posted by pb4uski View Post
But it is pretty easy to calculate the higher amounts using a real discount rate rather than a nominal discount rate and price a higher ladder of coverage in making a decision.
Agreed. But, buying even more life insurance for an old codger is gonna be expensive.

If all else is equal (and it may very well not be), the survivor benefit offered with the pension should be the better buy, even if the OP figures out the right amount of insurance to approximate the future value of his survivor benefit option. Why? If he chooses the survivor benefit option:
1) The OP isn't paying for coverage he doesn't need (e.g the case where his wife predeceases him--she is a couple of years older. Besides gender, there are obviously other health factors, etc. But the fact that she might go first should make the "survivor benefit" premiums lower than his life insurance premiums for the same coverage amount.)
2) The OP gets more of the coverage he does need (a continuation of these pension payments for use by his wife if he dies first and he is older than 83).

Put another way: The "insurance option" is only better than the "survivor benefit option" if the "above-the-expected-payout" charges (aka profit for the issuing company) included in the premiums for the latter are a lot higher than for the former. If these costs are close to the same, the survivor benefit option should be a slam dunk.

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Old 06-01-2014, 06:02 AM   #22
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A lot of assumptions/speculation there that may or may not be true. I would run the numbers and do the analysis and then decide. That said, if it was a close call I would lean to the survivor benefit.

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Old 06-02-2014, 01:59 PM   #23
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Another item to consider is that the insurance option assumes your spouse is ready, willing and able to appropriately invest, or work with an outside agent/agency to appropriately invest, the insurance proceeds to set up and maintain the intended income stream.

For folks who don't enjoy, or at least feel comfortable with, managing their investments, having a dependable monthly stipend from a survivor benefit, especially if it is COLA'd, may be as significant an issue as the numbers...assuming both options provide sufficient income.

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