Do you model loss of one spouse?

[rwdflynavy]

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.

 

[Gumby]

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.

 

[Badger]

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.



Cheers1

 

[braumeister]

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.

 

[boilerman]

We have enough money regardless of who dies first or when it happens.

But here are the actions I’ve 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) I’m 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.

 

[Sue J]

Good topic.

If DH goes first I will continue to get his pension at 100% and that includes the COLA, fixed at 3%. His HRA will stop, it's around $300/mo now and dropping to $250/mo next year. In addition to the pension, I'll still have my SS and part time income if I'm still doing that.

If I go first he will not get anything from my SS due to GPO. His pension will get a "pop up" at my death due to it no longer being reduced to benefit a survivor.

His pension supports us nicely now and all the rest is gravy so either of us should be able to be fine as a widow/widower. Some household expenses would drop but others would stay the same. If I'm left alone I'm hiring out the yard work and snow plowing.

I have 3 IRAs. The Traditional is small and I plan to convert to Roth in the near future. The Roth is bigger and my understanding is that at my death it becomes his and is treated like it was always his. He'd start RMDs at 72? due to the recent changes, right?

The 3rd one is an Inherited IRA, from my Dad. I've been taking RMDs since 2017, omitting 2020, based on my age. I haven't researched what happens to the Inherited IRA if I die while it still has a balance! I think if it goes to my kids they have a 10 year timeline, is it the same for my surviving spouse? I know it's treated differently than if it was my own IRA.

Tax wise, as MFJs we are solidly within the 12% bracket. As a single each of us would still be in the 12% bracket after the standard deduction. All that can change, of course!

 

[ncbill]

Yes, I regularly kill myself off several years before my DW in retirement models.

Plus doing Roth conversions well before taking SS on my tIRA rolled over from my previous corporate 401k.

 

[Out of Steam]

Me too, I'd do better because my pension would not have a survivor reduction and everything she has is 403b/401k.

We're in the same situation. I will be keeping a term life policy in force for five more years so that my wife would be able to minimize draws on her retirement funds before 65.

 

[cb2008]

Thinking of Disinheriting first spouse to die TIRA

Because we both have large TIRAs we are doing annual Roth conversions each year. I am considering having the first to die disinherit the remaining spousal TIRA to minimize RMDs and taxes for the survivor. We both would still have plenty to live on without the spousal TIRA. It’s would also spread out the tax burden for the kids.

What do you all think of this idea?

 

[RetiredHappy]

Because we both have large TIRAs we are doing annual Roth conversions each year. I am considering having the first to die disinherit the remaining spousal TIRA to minimize RMDs and taxes for the survivor. We both would still have plenty to live on without the spousal TIRA. It’s would also spread out the tax burden for the kids.

What do you all think of this idea?

This is a great strategy based on your situation.

 

[Romer]

Because we both have large TIRAs we are doing annual Roth conversions each year. I am considering having the first to die disinherit the remaining spousal TIRA to minimize RMDs and taxes for the survivor. We both would still have plenty to live on without the spousal TIRA. It’s would also spread out the tax burden for the kids.

What do you all think of this idea?

I am not understanding the benefit

Yes you don't get that extra income which increase your taxes, but you also get that extra income after taxes are paid so I would think you would still come out ahead. I thought conversions to get rid of RMDs was the way to go until I realized I wasn't putting the after tax portion of the RMD into savings

Medicare levels and costs are what may change things, but that's still a high number to cross that line

 

[MarieIG]

Because we both have large TIRAs we are doing annual Roth conversions each year. I am considering having the first to die disinherit the remaining spousal TIRA to minimize RMDs and taxes for the survivor. We both would still have plenty to live on without the spousal TIRA. It’s would also spread out the tax burden for the kids.

What do you all think of this idea?

Depends on your plan for LTC; how survivor would handle a prolonged bear market; children's income; desire to make charitable distributions; and security of income for remaining spouse, i.e. a federal pension is pretty secure.

Disclaiming a portion of; or all of, the TIRA can be reassessed following the death of the first spouse.

 

[Hyper]

I don't think I've seen this mentioned in the many posts about planning for retirement. Do you, and if so how, in any way project or adjust for the possibility of one spouse dying early? It's great to plug in that we're both going to live to 99 but that's pretty unlikely.


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.

Never did much figuring but thought about it and feel very blessed the good Lord gave us the ability to provide for DW if I go first. We do everything ourselves, which imo has saved hundreds of thousands over the years. I'm most concerned about DW getting things repaired, vehicles, home, etc as we had fleecing before, now we have hyper fleecing! We just broke ground on a new home so everything should be newish if I were to go first. I'd be fine financially if DW were to go first but not mentally. I bought a truck early spring, engine locked up and was denied warranty. New engine & install was $20k. Two months of fighting and I was finally fully reimbursed. While the engine was being replaced, that dealer ruined the rear window of the truck while grinding or welding near it. Now I have to replace the window. The dealer tech marred one of the high pressure fuel lines on the new engine. Instead of chancing more damage to my truck or other issues, I bought and replaced the line myself as I really need the truck now. 12 hr job and parts cost. Easily a $2k job. No way DW would fight like you have to with the way businesses fleece today! Too many of those $20k bills would eventually start hurting. Half our towns population are retirees. We constantly hear stories from friends, acquaintances paying for repairs then the job never being completed.