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Old 08-22-2021, 03:18 PM   #61
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We don't have it modeled, because we have no pensions, no kids, and since we ER'd in our 40's we didn't include SS in our "can we retire" firecalc. We do include SS just for planning, but it's mainly a buffer against disaster.

Basically it's one pot for two ppl now, and would be that same pot for one person. Since many expenses are the same for 1 or two, it would just enable extra discretionary spending for the surviving spouse, minus a few gifts to family on either side.
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Old 08-22-2021, 03:29 PM   #62
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3-legged stool here:

Our portfolio is enough for both of us so if either of us die the other will be fine.

SS will get cut.

My wife has a pension which we will likely choose only her life (since all the woman have lived to near 100).
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Old 08-22-2021, 03:47 PM   #63
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If I pass first DH will be fine and retain roughly 80% of our joint non investment income(SS/pension/VA disability). If he were to pass first my non investment income would drop to roughly 55% of our joint non investment income. I waited until age 70 to claim SS in order to mitigate this disparity, as my private sector work history afforded a greater SS benefit than his primarily public sector SS benefit yielded. Additionally we both have LTC policies with a hefty growing bucket of funds to protect our investments.

The tough nut is that taxes will be much greater once there is only one of us, due to RMD'S plus IRMAA. We have not done ROTH conversions as it would place us in the 33% tax bracket now (and would also have, prior to reaching RMD age).

It seems better to gamble that we both live long enough to deplete our IRA's significantly before passing, while remaining in the 24% bracket and lower IRMAA category. Fortunately we withdraw only .5% of our investment portfolio annually to supplement our income, so we view our investment portfolio as the vehicle to absorb the additional expenses for the widow/widower.
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Old 08-22-2021, 04:13 PM   #64
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One thing not mentioned yet in this thread but also related to surviving spouses is portfolio management. Many of us manage the nest egg and have spouses not really interested in learning to do so. In that case it makes sense to leave some kind of instruction or suggestion on how the portfolio should be invested and used to fund ongoing expenses.
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I am going for the KISS method there. We have assets all over and my plan is to get it all streamlined by the time we get all the roths done. Just the roth conversions alone will simplify things.
I agree. One reason I paid off our mortgage was to eliminate one more thing for DW to deal with should I die (or lose my marbles) first. I minimize the CC accounts and have started to consolidate mutual fund accounts.

We do not need an aggressive AA, so a conservative AA will be easier for her to deal it - actually, do nothing with.

We pay the bills monthly together to reinforce to her what our expenses are, to reinforce to her how to deal with them, when periodic/irregular bills may show up, etc. so that there would be no surprises (or potential scams).

RMDs will likely be the biggest challenge due to their size, but fortunately I can set them up to be automatic and have the taxes paid and the funds deposited where she can easily deal with it.
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Old 08-22-2021, 04:24 PM   #65
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It seems impossible to me that people would not know that or bother to find out.
You would be surprised. Military community chock full of widows who had "no idea" veterans payment would stop or retirement pension would stop. They call survivors services every week on every base in utter surprise. Spouses have been required to sign their agreement if the military member declines the survivor pension so hopefully these calls will atleast slow down at some point. There will always be a certain amount of "financial amnesia"
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Old 08-22-2021, 04:35 PM   #66
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Yes, my Excel spreadsheet model contains two main scenarios, first one with both of us surviving (at least to age 90) and a second scenario with DW surviving me (financially, the worse case).

The first scenario would be a boring plan if it were alone.

The surviving plan shows more challenges with 25% less non-portfolio income, higher marginal tax rates and higher Medicare premiums. Living expenses are not a concern, but there is potential to jump two tax brackets and multiple IRMAA levels.

The surviving plan, for us, is the one that motivates us to have a Roth conversion plan and a IRMAA containment plan. Neither Roth conversion nor IRMAA is significant for us as a couple, but both are relevant for the surviving spouse.
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Old 08-22-2021, 05:34 PM   #67
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So, if you don't start SS early how will you pay for living expenses?


We would use our savings during the years we delayed SS to supplement our pension income.
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Old 08-22-2021, 05:39 PM   #68
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I had a health scare (all fixed up now), so set up a "disaster" plan for my wife showing:
-a list of all our accounts and where we keep passwords
-a cash flow model showing when we would spend down checking, savings and taxable bonds.
-what order to draw on various accounts
-when to claim SS on her benefit vs. my survivor benefit
-when she should claim a survivor benefit I have on tiny pension
-when to switch from COBRA to ACA and which years to keep income low for ACA
-when and how much Roth conversions to do
-a financial model to provide comfort that the money will be OK
-tips about IRMAA tiers and ACA cliffs

We retrieved our will, read it and found a possible gap - we had never done medical powers of attorney for each other. So we downloaded forms on line and had them notarized, made copies and returned the originals to the safe deposit box.

Since my wife normally has zero interest in all this, I made her do a Roth conversion, made her move money from Vanguard to checking, showed her where to look to know if stocks/bonds need to be rebalanced and how to do that. I went through our IRAs and Roths and simplified them to be either US Total Stock Market + Total Bond Market or those plus Total International stock to make things as simple as possible.

Another gap I found was I checked contingent beneficiaries on our IRAs/Roth IRAs and added the words "per stirpes" after our kids names. As I understand it, without that, if one of our children passes before DW and I, our grandkids from our deceased child would not inherit the IRA/Roth IRA, it would all go to our surviving child, regardless of the will.

One issue I could not fix is that unfortunately our taxable account is a mess with lots of funds, but also with big existing capital gains that I don't want to take, so that's still an issue.

We discussed that our house is almost too big for the two of us and would be crazy for just one to try to heat, cool, maintain, pay taxes on, insure, etc., so I budgeted for one half the medical costa and a 20% reduction in other expenses (smaller house, one car, one phone, along with flood, clothing, and personal needs for one).

Overall, it was a good exercise and I recommend making a plan and discussing it before you need it. No one will be thinking straight if disaster strikes.
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Old 08-22-2021, 05:52 PM   #69
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DH is pretty on board equally with all our investments. Maybe not quite as much detail as me, but close enough. What we are doing is trying to consolidate our accounts, review the wills, shut down our LLCs, fix up the house to get it in sell or rent ready shape, and organize all the paperwork so the kids have an easy time once we pass. They are good pandemic projects since we aren't going out a lot right now.
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Old 08-22-2021, 06:31 PM   #70
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Originally Posted by MrsHaloFIRE View Post
You would be surprised. Military community chock full of widows who had "no idea" veterans payment would stop or retirement pension would stop. They call survivors services every week on every base in utter surprise. Spouses have been required to sign their agreement if the military member declines the survivor pension so hopefully these calls will atleast slow down at some point. There will always be a certain amount of "financial amnesia"
That's surprising.
I would have thought the default would be to have payments of some amount continue to the surviving spouse, but what do I know?
(I'm not personally involved with this...)
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Old 08-22-2021, 06:37 PM   #71
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That's surprising.
I would have thought the default would be to have payments of some amount continue to the surviving spouse, but what do I know?
(I'm not personally involved with this...)
I think sometimes when they are already struggling to make ends meet, the veterans elect to having no survivor benefits in lieu of larger paychecks.
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Old 08-22-2021, 08:49 PM   #72
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We would use our savings during the years we delayed SS to supplement our pension income.
In your calculations and decision making, your portfolio would benefit from reduced withdrawals if you take SS early. Just another consideration.
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Old 08-22-2021, 10:12 PM   #73
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I do periodically model it. Obviously, there are people where there is enough money that income (whether SS or pension) from one spouse passing would be trivial. That isn't the case for us. Also I think it can be relatively easy if one spouse never worked or there is a big disparity in SS so that the loss of SS will be minimal.

In our case, we both get "good" SS but the amounts are only a couple of hundred dollars a month different (mine is the higher). My assumption is that inevitably one of us will pass on before the other. And, the one remaining will lose a significant amount of SS income. Of course, many expenses will be lower. If those expenses are equal to or more than the lost income then no problem. If they are less then it is more of an issue.

So I model that periodically as it does change over time. Statistically, DH is more likely to go before I do (he is almost 7 years older than I am). One that that I recognize is important is when such a loss might occur. If he lives to the planning age of 95 then it really likely won't be a problem. On the other hand, if one of us died next year then it would be more problematical and more adjustments would need to be made by the survivor. Anyway -- to answer the question -- yes, I have modeled different possibilities ranging from an early death of one of us versus a later death and in between.
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Old 08-22-2021, 10:41 PM   #74
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Iíve definitely modeled this out. If DH were to die before me or need ltc, we would be fine, as I would sell our home and move into something with a lower cost of upkeep that would offset the cost of care. DH though is in his Ďpine boxí house. I think he would be ok if I were to go first, as heís pretty frugal, but me in ltc for any length of time would be a problem if we are on a bad trajectory. Since heís 7 yrs older, I do consider it a risk, but a small one.

The SS cuts and tax implications can be significant though if you donít have a large discretionary budget youíre willing to cut, so itís important to plan for them.

In short, yes, I have a spreadsheet where this is all modeled out. But DH doesnít necessarily pay attention to the numbers.
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Old 08-22-2021, 10:59 PM   #75
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Yes, I model it in a spreadsheet. I calculate loss of SS, currently assume a 20% cut in expenses, calculate taxes at the single rate after the death of the first spouse, and determine if Roth conversions will help enough to make a difference. I just have to change one cell in the spreadsheet to see the effect. We have no pensions or annuities at this time.
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Old 08-23-2021, 04:24 AM   #76
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That's surprising.
I would have thought the default would be to have payments of some amount continue to the surviving spouse, but what do I know?
(I'm not personally involved with this...)
The issue for military retirement at least is that you have to decrease your retired pay to cover the cost of survivor benefit plan. I have decided to take the full amount which will provide 55% of my pension to my spouse or my children if they are still eligible. This costs me about $500 each month (pre-tax) out of my paycheck.
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Old 08-23-2021, 04:29 AM   #77
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The issue for military retirement at least is that you have to decrease your retired pay to cover the cost of survivor benefit plan. I have decided to take the full amount which will provide 55% of my pension to my spouse or my children if they are still eligible. This costs me about $500 each month (pre-tax) out of my paycheck.
That's not so much different from any pension plan. The young wife and I each gave up ~10% of our pension to have a 100% survivor benefit for the other. There were also 75% and 50% survivor plans available for a lower price.
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Old 08-23-2021, 07:10 AM   #78
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I never modeled any plan but did have a plan if one of us goes first. The usual no debts, paid off house, Tricare for life, max savings/investment, RMD automatic withdraw through Vanguard, and burial expenses covered. For the past 9 years we have been living on SS, small pensions, and a portion of dividends that keep increasing. No concern about money for her when one SS and a small pension is gone. I have even set up a spread sheet of investments with locations and contacts with instruction for her (or me if my marbles start to roll away) to follow on how to withdraw money if she needs it. Due to a large amount of RMDs her problem will be to make sure the taxes are paid since there will be a big increase as a single taxpayer. She will have more money to spend without fear of running out so she can go bungie jumping in New Zealand, Hike the Inca Trail, etc.



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Old 08-23-2021, 08:40 AM   #79
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I have modeled it in many different ways, assuming the demise of one or the other of us at various points. This is a concern for me because I have a COLA pension but she doesn't. The loss of that amount (plus my SS) would be a significant hit.

Fortunately, our WR is low enough that it's not a problem for us, according to FIRECalc and all the other calculators. But yes, it has always been on my mind.
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Old 08-23-2021, 09:37 AM   #80
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We have enough money regardless of who dies first or when it happens.

But here are the actions Iíve taken, given my DW has no interest in our finances.

1) All of our investment accounts are with one company - Vanguard.
2) IRAs are invested in the Life Strategy fund. AA is constant, no rebalancing ever needed.
3) monthly withdrawals from IRA are setup with appropriate tax withheld and could continue indefinitely (about 2% withdrawal rate).
4) Iím deferring social security until 70 to maximize her payments if I go first.
5) Doing aggressive Roth conversion until 72 to reduce taxable income. Of course this benefits both of us but really helps if either of us has to file taxes as a single.

I also have a notebook with a summary of account information, our estate documents, location of deeds, etc. Trying to keep things as simple as possible without doing anything unwise.
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