Help! Pension survivor options

[Badger19]

DB Pension - Single Annuity or Joint

My DW and I are 58 and will be ER this year, debt free and in good health. Both of us have retiree healthcare subsidies and NW of almost 4MM with 3MM in qualified funds. Will need to decide how to receive my mega corp pension. Single annuity, not indexed for inflation would deliver 60k/year. Choosing 50% joint would cost us 6K/year or potentially 180k+ over a lifetime, assuming I live that long. Given our other wealth, we are questioning paying what amounts to a 180k insurance policy premium to guarantee a $30K/yr perpetual income stream that would be nice to have, but not absolutely necessary. Any advice?

 

[LuckyDog]

Depending on your expenses, it probably does not matter.

 

[Vacation4us]

So you don't need the money but 6 k a year less is too much to spend?

Your argument doesn't hold water.

Women out live men by a very large margin and although no one has a crystal ball think long and hard about not covering your wife.

The sentiment alone behind this choice gives me the shivers.

 

[Vacation4us]

Depending on your expenses, it probably does not matter.

Sometimes it's not about money.

 

[VanWinkle]

It is true that is would likely not make a difference, unless there was a Black Swan event that wiped out a large percentage of your assets. While the chances of that minimal, it is not impossible. I would error on the side of caution and take the joint pension to protect my spouse. I actually did exactly that almost 3 years ago and have not regretted it in retirement.

Good luck on your decision,

VW

 

[gauss]

DW and I have pensions and SS. We plan to defer SS draw to age 70 to maximize the payout assuming that we live to 100+ as planned.

One of the SS streams (ie the smaller of the two) will terminate when the first of us dies. This will be a significant hit at ~$35k/year for each SS stream.

As such, we have chosen to go with the joint annuity on the pensions. Actually paid a little extra to go up to 100% on pensions.

When the first one of us passes we do not want the survivor to have to 'downsize' based on expenses. Also, some expenses, may actually increase due to increased outsourcing with only one of us available to maintain the house.

We have no kids to leave an inheritance to, so the trade off, for us, of insuring our lifestyle vs having a larger estate when both of us pass clearly goes to the former.

A personal decision either way depending on personal circumstances and how you view the world.

-gauss

 

[savory]

I think the pension analysis takes into account that one of you will live longer. The amount of money that the two of you will receive is expected to be the same. It would seem the actuaries expect one of you to live 3 years longer based upon the numbers you shared.

When I received my pension, it was joint. I expected major costs such as rent or taxes would not have a dramatic change when one of us pass.

 

[CRLLS]

DW and I have pensions and SS. We plan to defer SS draw to age 70 to maximize the payout assuming that we live to 100+ as planned.

One of the SS streams (ie the smaller of the two) will terminate when the first of us dies. This will be a significant hit at ~$35k/year for each SS stream.

As such, we have chosen to go with the joint annuity on the pensions. Actually paid a little extra to go up to 100% on pensions.

When the first one of us passes we do not want the survivor to have to 'downsize' based on expenses. Also, some expenses, may actually increase due to increased outsourcing with only one of us available to maintain the house.

We have no kids to leave an inheritance to, so the trade off, for us, of insuring our lifestyle vs having a larger estate when both of us pass clearly goes to the former.

A personal decision either way depending on personal circumstances and how you view the world.

-gauss

In addition to the home maintenance that Gauss mentioned, the survivor's possible in-home living assistance would need to be outsourced, possibly requiring a move to an appropriate facility. Also consider that the survivor will be then be filing Single rather than Joint. The tax bill will increase and the expendable income will be lower. Whether that will be equal to lower expenses, who really knows for certain? Our "plan" consists of us both living to 100yrs but also "plans" on one of us dying tomorrow.

These are the very reasons that we rolled over my small DB plan when it was possible. We compared their 100% survivor fixed pension vs our 100% survivor IRA with Cola adjustments and chose the latter. All income streams stay as regardless of 1 or 2 of us to collect. Our budget is such that we didn't need the extra $ of a single annuity pension to make ends meet while we are both above ground. YMMV.

 

[pacergal]

DH and I both chose 100% joint to protect each other. The difference was negligible compared to peace of mind for survivor.

 

[mystang52]

DW will be retiring November 1, but will be putting in her papers within the next few months (she is a teacher). We have always been of the mindset that we will choose the life-only option. Women on both sides of her family had great longevity (95 years or so). Meanwhile, my family's history not as good. Much more significantly, I have a form of leukemia that makes it unrealistic to plan on lasting 'til, say, 90.

It seems like a no-brainer, but DW keeps asking the proverbial what-if-I-get-hit-by-a-bus question. We have sufficient assets, maybe even ample, that if I survived her and lost her pension it would not be a financial problem.

One somewhat tempting option we have is pension that is 94% of life only. Should my wife predecease me, I'd then get 25% pension (about 900/month). This would easily pay for any Medicare and supplemental coverages; we have retiree medical while DW is alive.
Any thoughts, suggestions?

 

[Gumby]

DH and I both chose 100% joint to protect each other. The difference was negligible compared to peace of mind for survivor.

The young wife and I are retiring in 4 months. We will both take the 100% survivor option. It reduces the pension amount by slightly under 10%. Our thinking is that we do not want the survivor to have to make any lifestyle changes. I also have a paid up whole life policy to account for the fact that the young wife (who is not eligible for social security on her own account) will not receive a social security survivor benefit after I die, due to the GPO.

 

[jazz4cash]

I think 10% is a bit high for a 50% survivor benefit. Especially since it seems that it is not a necessity for you. You need to compare with what is available from other providers at a site like immediateannuities.com.

My modest megacorp pension survivor benefit cost 5% for a 65% survivor benefit. It was subsidized by Mega I believe. DW's DB pension survivor benefit that is not subsidized and I think the cost is much than what you cited.

 

[fosterscik]

DW was eligible for a DB pension; I was not. Given her younger age and probable greater longevity I (we) did not opt for survivor benefits on her pension. I also have the much higher SS payments. If she were to die before me I would lose her pension and a relatively small SS payment on her account. I'll also spend a lot less on travel...

I'm the money/retirement planner for the couple and I was willing to gamble for a higher payout while we are young(er)

 

[Badger19]

DH and I both chose 100% joint to protect each other. The difference was negligible compared to peace of mind for survivor.

Thanks for the advice and perspectives. If our eventual choice would be the single annuity, both my DW and I will both be comfortable with it. In fact, the law requires her to sign off on it. That said, taking the joint option has some huge reductions to consider beyond the $180K as the benefit is reduced $30k/year for the survivor/heirs. If that survivor would be my DW, she could still take a $100K annual draw indexed for inflation for 40 years, plus SS and medical subsidies, endure a million dollar loss and still have $500K left over, all without the single annuity pension. While the decision is not one to take lightly, we are fortunate and thankful that it is even an option for us because for most, it cannot even be a consideration.

 

[Cobra9777]

DW and I both have pension annuities. We both elected the single-life option. We both have large SS benefits coming as well, and a decent size portfolio.

DW's pension is larger and has a partial COLA. Mine is smaller with no COLA. Also the joint options came at a very high price on hers. So we ruled that out just based on price plus the low probability that I would outlive her by any significant length of time. The joint options on mine were more reasonably priced but with no COLA, it's not going to be worth much after 15-20 years.

Also, I remember running some numbers in Excel to calculate the joint lifetime payout under various options and longevity assumptions. The breakeven point was age 73 for me. And the differences were not really significant unless I died in the first 10 years. And even then, the differences were insignificant compared to the size of our portfolio.

I quickly concluded that these joint/survivor options were just life insurance in another form. We have enough assets and income diversity that we no longer carry life insurance. So I don't know why we'd need to buy it in some other form. DW will do just fine with her COLA'ed pension, my larger SS, and the portfolio. And we're relying less on the portfolio now due to the larger single-life payouts.

 

[HarveyS]

Take life-only and buy an insurance policy on DW. Then you are covered. My DF did this and it worked out well for my DM (unfortunately, he died early in his retirement). Personally, I took a lump sum and invested it. Not sure you have that option, but if you do, I'd do that.

 

[dtbach]

Take life-only and buy an insurance policy on DW. Then you are covered. My DF did this and it worked out well for my DM (unfortunately, he died early in his retirement). Personally, I took a lump sum and invested it. Not sure you have that option, but if you do, I'd do that.

+1

 

[VanWinkle]

Take life-only and buy an insurance policy on DW. Then you are covered. My DF did this and it worked out well for my DM (unfortunately, he died early in his retirement). Personally, I took a lump sum and invested it. Not sure you have that option, but if you do, I'd do that.

The cash option would be more attractive if you are in one of the pension blowup states that are struggling atm. I am a fan of having a floor of pension/annuity/Social Security to handle all of the necessary bills. My portfolio is for the extras of travel, hobbies, and charity. If the pension is secure, I would take the 100% and buy the life insurance for your wife for 10 years to cover the 900.00 per month for you. Just a thought!

VW

 

[ckelly78z]

Do you both have sufficient life insurance, or do retirees still have life insurance late in life ? Your situation sounds rather like my wife and I, but I am the one with the pension, and the health issues, so we plan on taking the full survivorship at less per month, but ensure my wife's old age well being.

 

[kimcdougc]

We have the 75% option for DH pension. I would, as his DW get 75 percent of his pension. Social Security and a small withdrawal would be enough for me to get by and live life.

 

[Teacher Terry]

We both took the 100% survivor option. Plus if one of us dies they person that still alive gets a raise to where the pension would have been without the survivor option.

 

[Gumby]

MOD NOTE - these two threads, which deal with identical questions, have been merged.