Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Spousal Pension Benefit
Old 06-08-2008, 08:36 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Purron's Avatar
 
Join Date: Nov 2007
Posts: 5,596
Spousal Pension Benefit

Hi all,

My DH will be joining me in early retirement in about 9 months. His pension will represent about 50% of our retirement income until we receive social security in about 8 years. We both qualify for decent social security benefits and plan to start taking them at age 62. Until then, the rest of our retirement income will come from my much smaller pension and income from our investments. I did much more job changing than my DH, so most of my retirement assets are in IRAs and the TSP. I considered purchasing an annuity some time ago with my retirement funds which would approach the value of his pension, but decided it's is best not to turn my hard earned money over to an insurance company.

Here's the question - how much of a spousal benefit makes sense? I'm thinking an 80% benefit would work for us. This would reduce his pension (which does get cola increases) to about 86% of the amount with no spousal benefit at all and provide me with about 69% of the unreduced pension in the event something happens to him. I've run the numbers and these options would provide us with financial security. Even so, I sure don't want us to give up more in pension benefits than necessary. I've heard folks talk about the option of taking no spousal benefits and using a life insurance policy to provide security for the surviving spouse. I haven't checked the rates, but we are not crazy about insurance policies or insurance companies in general and think it might be expensive due to some medical issues and family history.

In any event, I would be interested in hearing how others analyzed this issue and derived the optimum amount of the spousal benefit on a pension.
__________________
I purr therefore I am.
Purron is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-08-2008, 08:45 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
Quote:
Originally Posted by Purron View Post
In any event, I would be interested in hearing how others analyzed this issue and derived the optimum amount of the spousal benefit on a pension.
My brother and his wife retired about 8 months ago. Her pension was much larger. However they decided that since she was younger, female and in better health they would go with no survivor benefits on her pension. This was mainly to give her more income after his eventual death, to help replace his SS.

So 6 months later she was dead.

It sounds like you plan on a survivor's benefit, it is just the amount you are unsure about. I have no real suggestion, other than it is likely best to make conservative assumptions.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 06-08-2008, 08:54 PM   #3
Full time employment: Posting here.
shiny's Avatar
 
Join Date: Jun 2005
Posts: 673
My Mom took her full pension with no survivor benefits (same rationale as Ha's sister in law) but uses part of the extra money she receives to buy a substantial term life policy for my Dad every year. That way he is covered if she does die first. (He has retirement funds, but no pension)
__________________
I'm made of atoms, you're made of atoms, and we're all in this together. Ben Lee
shiny is offline   Reply With Quote
Old 06-08-2008, 09:29 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 1,015
Quote:
Originally Posted by shiny View Post
My Mom took her full pension with no survivor benefits (same rationale as Ha's sister in law) but uses part of the extra money she receives to buy a substantial term life policy for my Dad every year. That way he is covered if she does die first. (He has retirement funds, but no pension)
This is what I did when I retired. DH is 5 years older, owns a business so he too has retirement funds but no pension. To provide a survivor benefit for him in case I "pre-decease" him would have meant a sizeable cut in my pension benefits now, so I bought term life ins. on myself. I figure that if I die first, he'll get my IRA plus the tax free insurance benefits which should be more than enough for his lifestyle...but not enough for the next Mrs. Achiever.
Achiever51 is offline   Reply With Quote
Old 06-09-2008, 01:57 AM   #5
Thinks s/he gets paid by the post
 
Join Date: Apr 2007
Posts: 1,305
We decided to take 100% spousal benefit for my DW. 50% was the default starting point. You had to have your spouse 'sign away' his/her 50% bennie.

It was not really a financial decision, but one of 'taking care of each other'. DW did not work for the majority of our life together, so has no personal pension, savings, investments, ... etc. The pension alone takes care of about 1/2 of our wants (not needs).
Doing the calculations, the 'hit' we take by taking the 100% spousal bennie is what we are comfortable with and fits into our planning and takes care of her from day 1 and beyond.

We looked at insurance, but you cannot guarentee coverage (at an economical price) when you get older. So that was not a viable option(to us).

IMO, the answer for each of us is ... it depends. Everyones situation will be slightly different. It will all be highly dependent upon confort levels desired.

Hope this helps.
__________________
Life is GREAT!
megacorp-firee is offline   Reply With Quote
Old 06-09-2008, 05:16 AM   #6
Full time employment: Posting here.
 
Join Date: Feb 2006
Posts: 987
Quote:
Originally Posted by haha View Post
My brother and his wife retired about 8 months ago. Her pension was much larger. However they decided that since she was younger, female and in better health they would go with no survivor benefits on her pension. This was mainly to give her more income after his eventual death, to help replace his SS.

So 6 months later she was dead.

It sounds like you plan on a survivor's benefit, it is just the amount you are unsure about. I have no real suggestion, other than it is likely best to make conservative assumptions.

Ha
My DW's parents (both passed) had the opposite situation. My FIL (steelworker - pension) did not take the survivorship option. This was back in the day that the spouse did not have to "sign-off" on the option.

Anyway, MIL passed first (age 71). He passed at age 88, eleven years after she went.

Just shows, there is no way you can get the "correct answer". For me, the answer would be am I concerned that my DW will have "enough" (or more than enough ) after I pass. That's what's driving me to the decision to hold off on SS till age 70.

For other folks, the "requirement" is to have current/ early retirement income at the "maximum" (at the time).

It all depends on the situation, and your "end desires".

- Ron
rs0460a is offline   Reply With Quote
Old 06-09-2008, 06:11 AM   #7
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,299
My MIL made the same assumption - that she would outlive FIL. Six months after retirement she died and the insurance went to four kids. DW and one sister gave all of it to him. Not a catastrophic mistake but he is financially hurting and it would have helped.

When I retired there were options for no bennies for her, 30%, 50%, 70% and 100%, meaning no change if either died. Each higher percentage decreased the overall amount in retirement so we picked 70% given that we have no bills. So if I go first she can sell this house (which she says she wouldn't want/can't keep up anyway), write a check for a smaller place, do with one vehicle instead of two, and one less person to think about for food, medical, activities, etc. So 70% seemed to fit the bill.

She could have stayed at her high-stress job for another ten years and received her own retirement but a stress-free spouse is well worth the hit I took on the income.
__________________
When I was a kid I wanted to be older. This is not what I expected.
Walt34 is offline   Reply With Quote
Old 06-09-2008, 06:46 AM   #8
Gone but not forgotten
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 11,447
My husband had only been retired 18 months when he died . His family had incredible longevity so it was a real shock . Luckily ,he had the survivor benefits because the medical was also tied to it . We both had quite a bit in savings but the monthly check kept me sane .
Moemg is offline   Reply With Quote
Old 06-09-2008, 08:13 AM   #9
Full time employment: Posting here.
tightasadrum's Avatar
 
Join Date: Aug 2006
Location: athens
Posts: 802
My plan, when I finally start my puny pension, is to take the 100% option. I have an insurance policy to cover the loss of the pension for DW. Frankly, I trust the insurance company staying solvent more than I trust the pension fund. And if DW goes first, not likely since she's 7 years younger, the payout from the policy should cover the loss of the pension. But every situation is different.
__________________
Can't you see yourself in the nursing home saying, " Darn! Wish I'd spent more time at the office instead of wasting time with family and friends."
tightasadrum is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Term Life on Pension rather than Benefit options? Maneiac FIRE and Money 14 01-04-2007 03:55 PM
Alternatives to pension survivor benefit? madsquopper FIRE and Money 4 12-05-2006 10:22 AM
MOVED: Social Security Spousal Benefit Martha FIRE and Money 0 06-30-2006 07:59 AM
Social Security Spousal Benefit Elderdude FIRE and Money 52 06-30-2006 07:55 AM
Defined Benefit Vs. Defined Contribution Pension Spanky FIRE and Money 24 01-18-2006 08:02 AM

» Quick Links

 
All times are GMT -6. The time now is 05:10 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.