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Old 08-22-2021, 07:47 AM   #21
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Originally Posted by ivinsfan View Post
It's embedded in a lot of threads so perhaps not quite as easy to single out. Every couple will be a little different so there is no cookie cutter answer. Just keep reading after you go part time.
I agree- haven't seen any specific threads on it.

It can get complicated- my late husband was 15 years older and for us the scary scenario was his going into LTC for years while I stayed in the house. We would have managed although it would have greatly changed my own retirement. That didn't happen- chronic health issues caught up with him and he died 5 years ago at age 78.

Good to see that you're looking at these scenarios, although that's typical of this Board. Sad stories are all around me- three women I know from my church who had to sell their homes after their husbands died because they were living mostly on SS and could no longer afford to live in them on just the Survivor benefits, and my grandfather's second wife who found out after her husband died that he had elected a pension amount with no survivor benefits. Her kids told her that if she wanted a decent life she'd have to find a second husband who was financially stable. I'm glad I didn't have to do that!
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Old 08-22-2021, 08:03 AM   #22
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It's very good to look at these issues. Loss of a SS payment or pension payment. Higher tax bracket, etc. I did a lot of 'what iffing' on my model for the various scenarios. My husband is almost 10 years older, but has longevity in his family. I will probably die before him - because my family dies younger (one of the reasons I retired early!). Even with the age difference, he'll probably survive me.

Don't get surprised like my bff's mom. Her husband (bff's dad) recently passed and they had no idea his SS (smaller than mom's) would go away. She's got a hole in her budget and is needing to move to a less expensive senior community. As I said - she had no idea this would happen. (Bff's parents were the poster children for *not* planning retirement and becoming burdens to their children.)
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Old 08-22-2021, 08:09 AM   #23
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...Her husband (bff's dad) recently passed and they had no idea his SS (smaller than mom's) would go away. ....
It seems impossible to me that people would not know that or bother to find out.
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Old 08-22-2021, 08:33 AM   #24
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@disneysteve Yes. If you have a spreadsheet-based comprehensive financial model, you can easily adjust income and expenses by year, simulating various ages of demise.
I've noticed that even without a spreadsheet-based comprehensive financial model you can easily adjust income and expenses............
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Old 08-22-2021, 08:39 AM   #25
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It seems impossible to me that people would not know that or bother to find out.

Agreed Gumby. I see it all the time though. DW's retired teacher friends are frequently good examples. When already in retirement they've never heard of GPO or WEP. Or the gal we recently had lunch with who mentioned she changed FA's because the first guy was too much "all business" while the new guy was chatty, called often and sent holiday cards. Sigh.......
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Old 08-22-2021, 08:51 AM   #26
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I have a paid up whole life policy that will more than make up for the lost social security income if she annuitizes the death benefit. So, no matter who dies first, the survivor will continue to have the same income, and the portfolio will be large.
I have taken the same approach. While it was adequate upon retirement, it is more than adequate now but I am fine with that. I have modeled my death 10 years prior to hers and she is still easily whole.
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Old 08-22-2021, 08:54 AM   #27
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I model it in my spreadsheet.

Income:

My COLA pension is 55% survivor.
SS is reduced

Expenses:

She keeps free healthcare for life.
I reduced base expenses 80% (food, gas, clothes, etc...)but left everything else at full value.
Travel is not reduced.

Life Insurance

I have a $500k term life insurance policy that I got years ago that is good through my age 78. I have kept that for now because it's cheap. Just make sure you enter the amount of life insurance paid out to match whatever type of dollars you are using in your model. $500k today is not the same as $500k 23 years from now (it's actually only $323k assuming 2% inflation). That bit me early on.

Taxes

I also model the impact on taxes and RMD's. If we do no Roth conversions between now and 72, it really impacts her taxes if I die because the RMDs are now taxed at single rate. As long as we do conversions, her RMDs will be small and there is minimal impact on single taxes.

Keeping the life insurance makes life easy. If I die before 79, she gets money and continues on without a worry. After 78, we need to make sure there is enough savings to cover the difference between income and expenses (about $10k / year). That doesn't take a lot of savings if you start @ 78.
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Old 08-22-2021, 09:03 AM   #28
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I am new to this forum and haven't seen any thread since I joined. I will share with you my own model as I run everything off an Excel spreadsheet to project income and expenses. Nothing to "plug in" as my spreadsheet is for our situation.

It is always about income >= expenses.
A) Current model is for 2 people:
- Hushand's SS + Wife's SS + Wife's Annuities + Husband's RMD. RMD constitutes less than 2% of total investments. This income is sufficient to meet expenses into the forseeable future. Both husband and wife have LTCI.

B) Husband passes away first
- Husband's SS (survivor benefits) + Wife's Annuities + 1% of total investments (before 72 yo taxable account, after 72 yo from RMD and leftover will be reinvested). Expenses will be reduced by Husband's medical insurance, half of food and groceries. Full amount of current household expenses (utilities, property tax, HOA, insurance etc). Country Club membership is likely to be dropped to sports and social member level and switched to playing public golf courses if so desired. $20K travel expenses will be reduced to $5K and all timeshare will be sold.

C) Wife passes away first.
- Husband's SS + Wife's Annuities + Husband's RMD
- Expenses will be reduced by Wife's medical insurance, food and groceries to drop by 30% (Husband drinks and wife does not) and timeshare will be sold reducing much of the travel expenses. Husband will continue with Country Club membership. Full amount of household expenses.

Hope this helps.
I suppose most of your travel is currently to the timeshare(s).

But I think $20K to $5K travel change is pretty drastic, as I've noticed traveling single is about 75% of the cost of traveling as a couple.

Example, hotel rooms charge practically the same. Cruise ships charge about 75% of the cost. Taxi etc are the same price or 96% the same price when flat rate.

I do like your analysis of the changing situation.
I would think cost of household repairs would dramatically increase for any non-handy spouse left alive as usually 1 spouse is handy at fixing things.
The cost of hiring a handyman for simple stuff easily adds $100 or more to any simple chore.

Example: clean out gutters will cost $125->$150 , currently I do it free.
Mow grass, I often do it free, costs $600->$700 per season.

Of course if nobody is handy, then the cost would remain the same, its a very situational thing.
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Old 08-22-2021, 09:13 AM   #29
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Originally Posted by disneysteve View Post
... If my wife were to pre-decease me, I think I'd be just fine. I'm more concerned with me going first, which is also statistically more likely.

I'm curious to hear how you all factor that in.
Yes, I do factor that in. Since my plan is in Quicken Lifetime Planner I can easily do a What-If that excludes DW's SS and the same spending and the end result isn't much different.

Her taxes will be higher... abut 13% of annual spending for the two of us... but her expenses will be lower because 1 rather than 2.... so net, she should be fine. BTW, my pension is joint life so there will be no change there, but the pension is only 18% of our expenses.
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Old 08-22-2021, 09:18 AM   #30
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I have modeled if I go first with changes to tax rates (single), change to my pension and lower expenses for her vs us. It was conservative assuming she stayed in this house which I doubt she would. It also had a significant buffer for yearly expenses/income and she being much much more frugal than I am I doubt she would even need that. That only provides a better cushion for her.

She really doesnt want to learn about finances so I felt I needed to run the model and develop a list of instructions on what she needs to do.

She will be fine if I go first which makes me feel better that I have provided for all scenarios. I will be fine if she goes first as well
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Old 08-22-2021, 09:30 AM   #31
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On some retirement calculators you can input a start year and stop year for SS. I play around with this to see what happens if one SS stops after X number of years. I usually do this for the early years between 62-72. I am hoping I can convince spouse for us to take mine at 62 and for him to wait until at least 67. But he has the mindset of wanting “his money” as soon as it is available, though it is detrimental to the big picture. Not fatally detrimental but with less desirable outcomes. It would be used for living expenses instead of our investments so it’s not like we would save it.

Also when you look at some of the expenses you drop you have to remember that savings could be absorbed through the additional taxes one pays as Single. Especially when survivor pensions are involved and there is no way to manipulate income.
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Old 08-22-2021, 10:09 AM   #32
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Absolutely.

I haven't modeled in a while; but everything I do takes spouse into consideration. And since I'm the financial overseer, I explained to DH what he needed to do, and he has been agreeable.

We are postponing DH's SS until age 70 as he has the better earning history. I have repeatedly told DH if I pass, to take his widower's benefit right away, and let his benefit grow.

DH took a hit on his pension to get the 100% joint & survivor for me. Had I signed a waiver of his pension, I would have also lost health insurance in the event he passed first.

I have a small variable annunity (with a death benefit) it used to be Vanguard, and is now Transamerica. When I trigger it, I will buy the rider for a guaranteed minimum payout, and will also do a 100 percent joint and survivor.

DH has a lifetime income fund through his job. The plan is to trigger a lifetime payout, with 100 percent joint and survivor around age 70.

We are looking at Roth conversions on my IRA between now and age 70 to reduce RMD. This would benefit us either as a couple, or the surviving spouse.

To the extent that I am buying any additional funds in taxable accounts, I am looking at funds that generate less tax.

One thing to be considered, is the financial prowess of each spouse, as well as potentially, an inability to handle a complicated portfolio due to advancing age. I would like our base income streams to be on auto-pilot by age 70 -72.

I do not see much of a reduction in expenses, (less food, and a reduction on health insurance vs. higher taxes) and we would want to contribute to grandchildren's education. With regard to vacations a single might want to travel first class, as we become less able to travel, we might want to rent a vacation home and have the kids come to us. DH has always done a lot around the home, and I would have to hire somewhat to do that. Conversely, buying into a good assisted care facility would not be cheap.
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Old 08-22-2021, 10:15 AM   #33
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. It would be used for living expenses instead of our investments so it’s not like we would save it.
So, if you don't start SS early how will you pay for living expenses?
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Old 08-22-2021, 10:23 AM   #34
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We have discussed "what ifs".
We both took 100% survivor for our pensions, so that value will be continuous for life for both and single survivor. Our basic monthly budget is based on this value.
Our savings will still be there
What we will lose will be the others SS, we figured reduced cost of living will offset, but also realize potential higher taxes as a single.
We do not have LTC insurance, but have discussed selling the house to use as needed, and the other spouse would still have the pension income, investments and SS.
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Old 08-22-2021, 11:17 AM   #35
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We have discussed "what ifs".
We both took 100% survivor for our pensions, so that value will be continuous for life for both and single survivor. Our basic monthly budget is based on this value.
Our savings will still be there
What we will lose will be the others SS, we figured reduced cost of living will offset, but also realize potential higher taxes as a single.
We do not have LTC insurance, but have discussed selling the house to use as needed, and the other spouse would still have the pension income, investments and SS.
Two pensions, two social securities and income from investments may actually pay for LTC of one spouse, without necessitating the second spouse to access house equity (which may have some "protection") vis-a-vis health care expenses. In turn, the home equity could be used to fund an assisted living facility for the second spouse, if LTC is not needed.

We also do not have TLC insurance, and this is one of the reasons, we are looking to backload (and thus bump-up) some of our income streams; which also provides the benefit of allowing for some Roth conversions in the interim.
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Old 08-22-2021, 11:23 AM   #36
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We aren't big spenders now, so we don't anticipate any financial issues ahead. The only income lost would be the lower SS benefit, offset by lower expenses with a household of one instead of two. The surviving spouse would still have the higher SS benefits, the pension income with survivor benefits, the portfolio income and would likely rent out the current house. The house rental income alone would be enough to cover the house expenses plus all of one spouses' annual living expenses with renting a condo in a retirement community.
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Old 08-22-2021, 11:23 AM   #37
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I'm divorced for twenty years and plan to stay single, so this is an academic question for me.
But there seems to be two extremes for the death of one spouse problem.

The first is the sad one, with the loss of the one SS and maybe a pension, such that surviving spouse can no longer stay in the current living situation and needs to reduce expenses considerably.

The second is the more common one on forums like this, where the survivor's income, including RMDs on a good sized tax-deferred egg, is just a bit less than when MFJ, resulting in higher taxes and IRMAA when filing single henceforth.

The latter can be mitigated to a degree by NOT setting up pensions and annuities to go 100% to survivor.

Situations vary, but I'm guessing if the survivor had around 75% of the AGI they formerly had as a couple, then lifestyle financial impact would be minimal...
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Old 08-22-2021, 11:47 AM   #38
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We have discussed "what ifs".
We both took 100% survivor for our pensions, so that value will be continuous for life for both and single survivor. Our basic monthly budget is based on this value.
Our savings will still be there
What we will lose will be the others SS, we figured reduced cost of living will offset, but also realize potential higher taxes as a single.
We do not have LTC insurance, but have discussed selling the house to use as needed, and the other spouse would still have the pension income, investments and SS.
Depending on the situation, I think selling the house might not be a good move.
Assume in LTC, ensure the person gets into one that takes medicaid after all money runs out. This is important as this situation can drain a HUGE amount of money.

Once you spend all the savings... medicaid considers married folks separate money as marriage money an available for the LTC, so practically all the money will be available to be spent.

I'm vague on this but with a spouse living in the house, medicaid will only put a lien on the house and recover what they can when it sells. Their lien could be more than the house value.

If instead one sells the house after savings are gone, then the spouse has to move somewhere, and LTC takes all the sale price, and then the person is still going on medicaid.
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Old 08-22-2021, 11:52 AM   #39
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<snip>

DH took a hit on his pension to get the 100% joint & survivor for me. Had I signed a waiver of his pension, I would have also lost health insurance in the event he passed first. <snip>
I'm glad that regulations in most (all?) states require that waiver now. I filed for a pension in my name when DH was in his last months and we had a notary come to the house so he could sign off on the version with no survivor benefit.

Quote:
I do not see much of a reduction in expenses, (less food, and a reduction on health insurance vs. higher taxes) and we would want to contribute to grandchildren's education. With regard to vacations a single might want to travel first class, as we become less able to travel, we might want to rent a vacation home and have the kids come to us.
DH and I were already flying Business Class on long-hauls so airfare spending is down. I use one tour group (Overseas Adventure Travel) that does not charge a single supplement and a cruise line (UnCruise) that does. So, I'm probably spending less for the equivalent amount of travel but, as you noted, more on taxes and not much reduction in food or utilities.
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Old 08-22-2021, 11:54 AM   #40
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Of course we considered it. Since we both rolled our pensions and 401K's into IRA's, that income stream would not change. SS would be reduced to the higher of our benefits regardless of who goes first. Taxes will of course change. But then again, expenses for food, clothing, cars, hobbies etc will be reduced. For all intents and purposes our survivor's income and expenses will be essentially the same regardless of which of us are the survivor. We have a lot of fluff in our anticipated expenses. Our plan is based on a flat expense (including inflation) throughout our existence, not a declining one as some use. If we were cutting our plan more tightly, I would be more concerned and do a more detailed evaluation. Of course a plan doesn't guarantee anything.
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