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Wife Won't Get My SS When I Die- How To Make Projections?
Old 02-28-2014, 09:27 PM   #1
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Wife Won't Get My SS When I Die- How To Make Projections?

My wife is a teacher planning to retire in 16 months at age 57 and is in the Illinois TRS (Teachers Retirement System). I would greatly appreciate if respondents didn't comment on the IL pension trouble issue, that is a different topic and as you'll see below we are already bummed out enough.

We are very depressed after our annual visit with our (new) CFP. We had always thought we were in very good shape for retirement with our three legged stool of Pension, Social Security and the Nest Egg making 3%. As usual the CFP projected my lifespan out to 92 as a worst case scenario in terms of longevity. Knowing I won't live that long I said why don't we have me checking out at 72, we compromised at 82. I have many health issues (age 60) and the men in my family don't live that long but I agreed to humor him.

Suddenly the projections didn't look so rosy! This new CFP was astute enough to know that my wife would NOT collect any of my SS because of her government pension so the graph took a plunge (at her age 67) like we have never seen before! Ugh! We never calculated that into our plans before since the calculator(s) always had me living to the unrealistic age of 92.

I am curious as to how other couples do their financial planning when one spouse won't collect ANY SS due to a government pension. Since we don't know when I will die there's no way to plug the figures into a calculator. If you are part of a couple in the same situation I would appreciate how you handle your projections. I am not interested in the solution of an annuity to cover a shortfall since we don't know when I would die plus there is no right of survivorship.

Thank you
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Old 02-28-2014, 09:40 PM   #2
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The young wife is a teacher and we are in the same situation. The only conclusion I have come to is that I should start taking SS at 62 so that we can preserve our nest egg for her use after I'm gone. We are also maintaining a paid up whole life insurance policy I bought many years ago which, if wisely invested (or annuitized) should provide her with the same amount as my SS.
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Old 02-28-2014, 09:41 PM   #3
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That is commonly a tight spot for retirement planning. It was my worst case as well. You need to look at several different scenarios for your demise, say every 5 years or so. Then make those work just as well as your original plan. In our case we lose one SS benefit out of two that are about equal, and one smaller pension if DW goes first. In addition to that, the survivor is taxed at the single rates which can hit some harder than others.

As for SS, you probably want to take it early if 82 sounds like a stretch. Your CFP should be able to make some good recommendations if they caught this problem for you.
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Old 02-28-2014, 09:52 PM   #4
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Thanks Gumby. Can you please further explain the logic of taking the SS at 62? I won't be drawing from the nest egg until 66 at the soonest.

And what if you do live a long life? Won't you regret taking it early?

And as fort he whole life policy- you had further foresight than I. For me I suppose it's too late to get one, especially with my pre-existing health conditions. I do have term for $600K but that expires when I am 70.
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Old 02-28-2014, 09:56 PM   #5
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Thanks Animorph. That's a good idea, run 5 year plans. It's a good feeling to finally be worth more alive rather than dead!
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Old 02-28-2014, 10:06 PM   #6
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Thanks Gumby. Can you please further explain the logic of taking the SS at 62? And what if you do live a long life? Won't you regret taking it early?

And as fort he whole life policy- you had further foresight than I. For me I suppose it's too late to get one, especially with my pre-existing health conditions. I do have term for $600K but that expires when I am 70.
I was born in 1959, so my full retirement age is 66 years and 10 months. If I start taking SS at 62, I'll get about 71% of my full SS. Doing the math, I would break even at 78 years and 9 months old. I asked myself -- how much longer than that can I reasonably expect to live? And although exact calculations are impossible because I don't know precisely how long I'll live, I think I'll be happier having saved that much out of the nest egg to support my bride when I'm gone.
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Old 02-28-2014, 10:31 PM   #7
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Wouldn't your spouse receive a reduced survivor SS benefit?

From the SSA website:

Government Pension Offset

A law that affects spouses and widows or widowers. If you receive a pension from a federal, state or local government based on work where you did not pay Social Security taxes, your Social Security spouse’s or widow’s or widower’s benefits may be reduced. This fact sheet provides answers to questions you may have about the reduction. How much will my Social Security benefits be reduced?

Your Social Security benefits will be reduced by two-thirds of your government pension. In other words, if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted from your Social Security benefits. For example, if you are eligible for a $500 spouse’s, widow’s or widower’s benefit from Social Security, you will receive $100 per month from Social Security ($500 – $400 = $100). If you take your government pension annuity in a lump sum, Social Security still will calculate the reduction as if you chose to get monthly benefit payments from your government work.

http://www.ssa.gov/pubs/EN-05-10007.pdf
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Old 02-28-2014, 10:39 PM   #8
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What about setting up an investment right now and leaving it untouched for 20 years? That would then be available for a survivor. Since you won't use the funds in early retirement, you can afford to be aggressive in that investment. Would that be a good idea? that's a question for everyone.
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Old 02-28-2014, 11:55 PM   #9
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We are in a similar situation. We took DHs pension (Ohio PERS) as 100% to survivor so it was reduced. If I die first his pension increases to the amount that it would have been if he took the single option.

Does your wife's pension have this option?

My SS is small so his reduction by 2/3 of his pension would reduce his survivor benefit of my SS to zero.
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Old 03-01-2014, 06:47 AM   #10
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If DW dies before me I will not get any of her SS because my pension is too large. I always calculated that fact into my planning. If I die fist she only gets 60% of my pension so it evens out. We planned with the assumption that one of us would die early so we needed sufficient portfolio to continue without strain. I initially thought she should take SS early to insure getting as much out as possible if she dies early but more recently concluded that she is better off waiting until 66 and having a larger SS income. Early SS would be offset (delayed until 66) because of a regular income stream coming in from her law partnership which complicates matters.
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Old 03-01-2014, 09:51 AM   #11
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Hello 34rlsa,

Apparently in Illinois the spouse collecting the teachers pension can not receive any money from the spouse's social security, none.

We are debating which of the pension amount survivor benefits to choose from, we have a year to decide. I am thinking that since she won't receive my SS benefits we should choose the option that maximizes her pension payment? But then, what if she dies? Then I'm up a creek...

I do like the idea of putting money into an aggressive 20 year investment but that seems on par with buying lottery tickets?

Thanks everyone for you input. I suppose the smarter thing, had I looked into it, would have been buying a whole life insurance policy perhaps 10-20 years ago. But as a DIY investor I accepted the mantra: "Buy term and invest the difference." However, we who are married to people with a government pension are in a different boat. I wish I had had a wise uncle...
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Old 03-01-2014, 09:57 AM   #12
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I am the retiree subject to GPO. What I did was reduce the % my DH receives if I pre-decease him. I had to make that decision well before I knew what our SS would be so it was best guess.
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Old 03-01-2014, 10:14 AM   #13
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Thanks Gumby. Can you please further explain the logic of taking the SS at 62? I won't be drawing from the nest egg until 66 at the soonest.

And what if you do live a long life? Won't you regret taking it early?
Use this calculator to look at benefit of taking SS early or late based on anticipated rate of return on your savings: Social Security calculator: retirement planning for you and spouse.

We had leaned towards taking it late, but this was an eye opening exercise for us. YMMV.
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Old 03-01-2014, 10:14 AM   #14
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Apparently in Illinois the spouse collecting the teachers pension can not receive any money from the spouse's social security, none.
SS is governed by federal law and doesn't vary state to state. Your situation is not a result of living in Illinois except to the extent that IL teachers don't pay into SS (in many states, teachers do pay into SS). The result comes because 2/3 of her pension from a non-SS job will exceed the survivor's benefit she would otherwise receive when you die.

Although I would bet that, knowing IL teachers do not pay into social security and are therefore subject to the WEP and the GPO, one could look at the typical teacher retiree in IL and the maximum possible social security benefit and make a generalization that no retired IL teacher will receive a spousal survivor benefit due to the GPO.
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Old 03-01-2014, 10:22 AM   #15
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Use this calculator to look at benefit of taking SS early or late based on anticipated rate of return on your savings: Social Security calculator: retirement planning for you and spouse.

We had leaned towards taking it late, but this was an eye opening exercise for us. YMMV.
Reading through the assumptions for that calculator, I don't see that it takes into account the potential effects of the GPO. It possibly could do so for a range of potential ages when the other spouse dies.
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Old 03-01-2014, 12:25 PM   #16
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Reading through the assumptions for that calculator, I don't see that it takes into account the potential effects of the GPO. It possibly could do so for a range of potential ages when the other spouse dies.
No, not the GPO, but looking at your own SS to help you decide along with your anticipated savings rate if it's better to take SS at 62 or 70, or anywhere in between. We had originally assumed we would wait til 70, but the calculator showed us that it was better to take it at 62 and keep the assets we would have otherwise used for expenses fully invested. It simply takes more factors into consideration when determining what your highest benefit will be, and may give a clearer picture to the OP in making that determination for himself.

Now if only I could find something that takes taxes into consideration too!
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Old 03-01-2014, 02:38 PM   #17
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Now if only I could find something that takes taxes into consideration too!
That too. It is not such a straightforward decision as much of the financial press makes it out to be.
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Old 03-01-2014, 02:41 PM   #18
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I receive a government pension and will not be eligible for a survivor's benefit from my DH. I knew this and took it into consideration before I took an early out retirement. I also knew that my pension will go up some, if I outlive my DH, since it is reduced for survivor's benefits for him if I die. It will also go up, since my HI would be for a single instead of family plan and I would no longer have LTCI coming out for DH. I am also finishing getting my 40 quarters of coverage for SS for myself, although I will probably only get around $80.00 per month due to WEP. I figure that every little bit will help. We have not touched our TSP, 401K and IRAs yet either and hopefully some of those would be left. One thing that I did not take into consideration, was that we would be paying taxes at the single rate, when one of us dies.
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Old 03-01-2014, 02:54 PM   #19
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Although I would bet that, knowing IL teachers do not pay into social security and are therefore subject to the WEP and the GPO, one could look at the typical teacher retiree in IL and the maximum possible social security benefit and make a generalization that no retired IL teacher will receive a spousal survivor benefit due to the GPO.
Actually Gumby, pretty far from factual. If you reworded your statement to "no retired career Il teacher......." you would be closer. Because there are tens of thousands of ILteachers (and other non-SS gov't employees) who wind up with pensions for relatively short careers with the gov't, there is a significant percentage where two-thirds of their pension is indeed less that their spouses SS.

Despite getting her 40 qtrs (+) in, my DW won't receive any spousal benefit from my SS and her own SS, due to WEP, isn't close to enough to pay her Medicare Part B. And so be it..........
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Old 03-01-2014, 03:03 PM   #20
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Actually Gumby, pretty far from factual. If you reworded your statement to "no retired career Il teacher......." you would be closer. Because there are tens of thousands of teachers (and other non-SS gov't employees) who wind up with pensions for relatively short careers with the gov't, there is a significant percentage where two-thirds of their pension is indeed less that their spouses SS.

Despite getting her 40 qtrs (+) in, my DW won't receive any spousal benefit from my SS and her own SS, due to WEP, isn't close to enough to pay her Medicare Part B. And so be it..........
I guess my implicit assumption was that we were talking about teachers retiring after 25 years or so of teaching. In any event, I was mostly trying to figure out why the OP had somehow been informed that it was a rule specifically in IL that retired teachers would never get survivor benefits. This seemed the most likely explanation for why people might say that.
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