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DB pension choice
Old 09-08-2016, 09:56 AM   #1
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DB pension choice

The 100% joint-and-survivor option always seemed like a no-brainer, but now that it's time to make that decision, there are definitely different perspectives that can be examined. I'll dispense with most of them, since DW has no benefits other than mine and she gets to make this decision, but how about this one:

Choose single-life and take out an insurance policy on me that costs less than the increase in the pension payment?

The non-COLA-ed pension is enough to take the pressure off our withdrawal rate, but it will supply about half our monthly income now. It will probably buy groceries in 20 years.

Anybody done this or know of drawbacks?

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Old 09-08-2016, 10:14 AM   #2
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Originally Posted by Gazingus View Post
Choose single-life and take out an insurance policy on me that costs less than the increase in the pension payment?

Anybody done this or know of drawbacks?

Have you checked into this? If you're close to retirement age, it might be hard to get life insurance, particularly if you'd had any health issues. That's what we discovered.

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Old 09-08-2016, 10:30 AM   #3
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When I filed my papers the wife and I decided to go with the 75% survivors option because the mix was right for us, it covers most of our bills now and if I croak tomorrow there is a small life insurance payout that is enough to pay off the house and she would be fine with the 75%. I also should note if it were not for being able to convert from group life insurance to individual policy I would have no life insurance as I am for all intents and purposes uninsurable. Health issues will do that to you.
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Old 09-08-2016, 10:42 AM   #4
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Since I don't have a defined benefit pension (or a spouse), it's not a question I'll face directly. But my Mom recently faced this when my Dad passed away. His passing was such an emotional time for her that she was glad she had his pension continuing and she didn't need to make any budgetary adjustments or deal with any big financial decisions at that time.

She's an educated woman and she's fine handling her regular finances, but getting a big life insurance settlement that she'd need to manage would have been hard for her, especially when there were so many other changes and emotional impacts at that time. She felt better just receiving the same income she was used to for years.

Of course there are financial aspects to this decision and personal circumstances such as the age difference, health issues etc may impact your choice. But don't ignore the possible emotional impact of your decision as well.
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Old 09-08-2016, 12:57 PM   #5
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We did exactly this. Because I am older than DH the joint and survivor option was very expensive. A 20 year term life insurance policy was much cheaper. I took out the policy at 52 and retired at 54. The insurance proceeds would pay off the mortgage and add nicely to the nest egg, plus he has a pension of his own so he won't go hungry. I do want to have the house paid off before the insurance term expires, however its probably not really necessary to do so.
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Old 09-08-2016, 01:11 PM   #6
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I would only do that if I could take out the insurance for a long enough time to cover all possibilities. Otherwise You could still be alive but uninsurable and then when you die she is in trouble.

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