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Pension Annuity Question
Old 07-23-2020, 11:29 PM   #1
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Pension Annuity Question

While my retirement is still a year (or more likely two) away, I am still trying to make decisions about a pension annuity I will receive (actually, I've obsessed over it over the last few years, because I have had no idea what to do)

Little background.....dh and I both have pensions (we are both doing 100% survivor) and dh has social security (probably about 22-24K per year, because he's going to start at 62). If dh dies first, I lose his SS payment but my pension reverts from 100% survivor to member only benefit, which is an increase of about 9K per year.

My annuity has a cash value of about 50K. I can choose a lifetime benefit (about $325 per month), or a period certain annuity for 1-10 years (for example, I can receive $1385 a month for 3 years or $525 a month for 10 years). However, I just recently discovered I can also roll over the cash value into an IRA.

I've been thinking, maybe what I should do is roll over the money and just set it aside. If dh does first (statistically likely, as he's 3 1/2 years older than me) I can then start taking money out to help make up the lost SS.

Am I missing another good idea? Is there a better way to utilize this annuity?
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Old 07-23-2020, 11:52 PM   #2
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Originally Posted by PandaBear View Post
My annuity has a cash value of about 50K. I can choose a lifetime benefit (about $325 per month), or a period certain annuity for 1-10 years (for example, I can receive $1385 a month for 3 years or $525 a month for 10 years). However, I just recently discovered I can also roll over the cash value into an IRA.
$1385/mo for 3 years gives you $49,860, so you don't even get the full $50K back. You can ignore that option.

$525/mo for 10 years gives you $63K, or ~2.3%/yr return on the $50K.

With $325/mo ($3900/yr) for life vs. $50K lump sum, it depends on your life length and the annual returns you would get on the $50K. You could compare the income $50K would buy at Immediate Annuities - Income Annuity Quote Calculator, and/or put the $50000 and $3900 into rows 101 and 102 on the 'Misc. calcs' tab of the case study spreadsheet.

Both of those indicate the annuity payment is well worth considering.
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Old 07-24-2020, 07:07 AM   #3
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Originally Posted by PandaBear View Post
.... Little background.....dh and I both have pensions (we are both doing 100% survivor) and dh has social security (probably about 22-24K per year, because he's going to start at 62). If dh dies first, I lose his SS payment but my pension reverts from 100% survivor to member only benefit, which is an increase of about 9K per year.

My annuity has cash value of about 50K. I can choose a lifetime benefit (about $325 per month), or a period certain annuity for 1-10 years (for example, I can receive $1385 a month for 3 years or $525 a month for 10 years). However, I just recently discovered I can also roll over the cash value into an IRA.

I've been thinking, maybe what I should do is roll over the money and just set it aside. If dh does first (statistically likely, as he's 3 1/2 years older than me) I can then start taking money out to help make up the lost SS.

Am I missing another good idea? Is there a better way to utilize this annuity?
Aren't you missing that if your DH dies first that your benefit goes up $9k a year... so from $325/month to $1,075/month? Are those numbers right?

Usually the lump sum is highly discounted so the plan can resolve itself of the obligation at a great price... plan participants see that big lump sum number and their eyes go wide open.
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Old 07-24-2020, 07:14 AM   #4
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Even if the kicker doesn't happen (IOW, DH outsurvives you), the life pension seems pretty good depending on how long you live.

Lump Sum  50,000
Monthly benefit  325
Payout rate 7.80%
   
AgenIRR
 0 
601-97.6%
612-76.9%
623-54.8%
634-38.9%
645-27.9%
656-20.2%
667-14.5%
678-10.3%
689-7.1%
6910-4.6%
7011-2.7%
7112-1.1%
72130.2%
73141.3%
74152.2%
75162.9%
76173.5%
77184.1%
78194.5%
79204.9%
80215.3%
81225.6%
82235.8%
83246.1%
84256.3%
85266.4%
86276.6%
87286.7%
88296.9%
89307.0%
90317.1%
91327.2%
92337.3%
93347.3%
94357.4%
95367.5%
96377.5%
97387.6%
98397.6%
99407.6%
100417.7%
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Old 07-24-2020, 09:24 AM   #5
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Originally Posted by pb4uski View Post
Aren't you missing that if your DH dies first that your benefit goes up $9k a year... so from $325/month to $1,075/month? Are those numbers right?

Usually the lump sum is highly discounted so the plan can resolve itself of the obligation at a great price... plan participants see that big lump sum number and their eyes go wide open.
Sorry, not, I wasn't clear. (I try not to overwhelm with info and it always seems I leave something out)

1. Dh Pension (100% survivor)
2. My pension (100% survivor, reverts to member only benefit, which is 9K more per year if dh dies first)
3. Dh's SS: ends when he dies.
4. My pension annuity. This is what I'm referencing above.

Thanks
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Old 07-24-2020, 09:32 AM   #6
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Quote:
Originally Posted by pb4uski View Post
Even if the kicker doesn't happen (IOW, DH outsurvives you), the life pension seems pretty good depending on how long you live.

Lump Sum  50,000
Monthly benefit  325
Payout rate 7.80%
   
AgenIRR
 0 
601-97.6%
612-76.9%
623-54.8%
634-38.9%
645-27.9%
656-20.2%
667-14.5%
678-10.3%
689-7.1%
6910-4.6%
7011-2.7%
7112-1.1%
72130.2%
73141.3%
74152.2%
75162.9%
76173.5%
77184.1%
78194.5%
79204.9%
80215.3%
81225.6%
82235.8%
83246.1%
84256.3%
85266.4%
86276.6%
87286.7%
88296.9%
89307.0%
90317.1%
91327.2%
92337.3%
93347.3%
94357.4%
95367.5%
96377.5%
97387.6%
98397.6%
99407.6%
100417.7%
I've seen this calculator used by you several times. Is it your own, or available somewhere through a link?

Thanks,

VW
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Old 07-24-2020, 10:07 AM   #7
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Originally Posted by VanWinkle View Post
I've seen this calculator used by you several times. Is it your own, or available somewhere through a link?

Thanks,

VW
Don't know what pb4uski uses, but the spreadsheet mentioned in post #2 of this thread will show a chart with similar information:



That spreadsheet is available at Case Study Spreadsheet updates.
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Old 07-24-2020, 01:54 PM   #8
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Originally Posted by VanWinkle View Post
I've seen this calculator used by you several times. Is it your own, or available somewhere through a link?

Thanks,

VW
Home grown, but I also like the one that SevenUp found.
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Old 07-24-2020, 03:08 PM   #9
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Home grown, but I also like the one that SevenUp found.
why does it only go out to 8%?

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Old 07-24-2020, 04:28 PM   #10
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why does it only go out to 8%?

The dividing line (for this particular case) goes vertical before 8%.
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Old 07-24-2020, 10:56 PM   #11
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Originally Posted by PandaBear View Post
While my retirement is still a year (or more likely two) away, I am still trying to make decisions about a pension annuity I will receive (actually, I've obsessed over it over the last few years, because I have had no idea what to do)

Little background.....dh and I both have pensions (we are both doing 100% survivor) and dh has social security (probably about 22-24K per year, because he's going to start at 62). If dh dies first, I lose his SS payment.......
Why would you lose his SS payment? If you are at least age 60, you will get his as a survivor benefit. Or do you have your own SS benefit, and yours is greater than his? If you have a government pension, remember about WEP and GPO wrt. SS.
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Old 07-25-2020, 02:00 AM   #12
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Why would you lose his SS payment? If you are at least age 60, you will get his as a survivor benefit. Or do you have your own SS benefit, and yours is greater than his? If you have a government pension, remember about WEP and GPO wrt. SS.
I only have 28 quarters towards social security, so I will not get my own. My pension far outweighs my husbands social security, so no survivor benefit. My understanding is that it doesn't matter where the pension is from.
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Old 07-25-2020, 05:26 AM   #13
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Originally Posted by PandaBear View Post
I only have 28 quarters towards social security, so I will not get my own. ...
Are you sure?

Quote:
Benefits For Your Spouse
Even if they have never worked under Social Security, your spouse may be able to get benefits if they are at least 62 years of age and you are receiving or eligible for retirement or disability benefits. Your spouse can also qualify for Medicare at age 65. ..
https://www.ssa.gov/benefits/retirem...applying7.html

Quote:
You qualify for spousal benefits if:
  • Your spouse is already collecting retirement benefits.
  • You have been married for at least a year.
  • You are at least 62 (unless you are caring for a child who is under 16 or disabled, in which case the age rule does not apply).
You can collect benefits on a spouse’s work record regardless of whether you also worked. If your own retirement benefit is lower than your spousal benefit, Social Security will pay you the higher amount.
https://www.aarp.org/retirement/soci...cial-security/
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Old 07-25-2020, 08:47 AM   #14
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I only have 28 quarters towards social security, so I will not get my own. My pension far outweighs my husbands social security, so no survivor benefit. My understanding is that it doesn't matter where the pension is from.
I have never heard of a pension offsetting one's SS other than some government pensions under WEP.

No matter how many credits you have, you have spousal SS benefits; 50% of your husband's at full retirement age, adjusted by your age at which you apply.

After your husband passes, you will drop your spousal and continue on with his amount as survivor benefit.
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Pension Annuity Question
Old 07-25-2020, 10:22 AM   #15
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Pension Annuity Question

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I have never heard of a pension offsetting one's SS other than some government pensions under WEP.

No matter how many credits you have, you have spousal SS benefits; 50% of your husband's at full retirement age, adjusted by your age at which you apply.

After your husband passes, you will drop your spousal and continue on with his amount as survivor benefit.


My pension is through STRS.....it’s a state teachers pension.

This says it does.
https://www.calstrs.com/sites/main/f...strsandyou.pdf
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Old 07-25-2020, 11:01 AM   #16
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My pension is through STRS.....it’s a state teachers pension.
Hi Panda, based on your descriptions, I thought you might be a California teacher. My wife is one too. We deal with many of the same questions with a CalSTRS pension and CalSTRS Supplemental Account (your potential annuity).

I question, though, one of your assumptions. I understand that with a CalSTRS pension, you can designate your spouse as a 100% beneficiary, but you can only switch to "member only" IF your spouse dies before your retirement. That $9,000/year boost you calculate may only exist if DH dies soon. See "Your Option Election" in your annual report.
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Old 07-25-2020, 11:29 AM   #17
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My pension is through STRS.....it’s a state teachers pension.

This says it does.
https://www.calstrs.com/sites/main/f...strsandyou.pdf
Same in Texas, as to SS benefits and WEP.

Plan to take the TRS retirement this year at 52. I will have put in approx $130K into TRS account over 28 years. Hopefully my wife or I can make it to 80, then we'd have taken out approx 1 million.
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Old 07-25-2020, 11:31 AM   #18
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Originally Posted by PandaBear View Post
My pension is through STRS.....it’s a state teachers pension.

This says it does.
https://www.calstrs.com/sites/main/f...strsandyou.pdf

Yes, exactly what I posted; a government pension with a WEP provision.

Thanks for clarifying.
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Old 09-17-2020, 08:52 PM   #19
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Hi Panda, based on your descriptions, I thought you might be a California teacher. My wife is one too. We deal with many of the same questions with a CalSTRS pension and CalSTRS Supplemental Account (your potential annuity).



I question, though, one of your assumptions. I understand that with a CalSTRS pension, you can designate your spouse as a 100% beneficiary, but you can only switch to "member only" IF your spouse dies before your retirement. That $9,000/year boost you calculate may only exist if DH dies soon. See "Your Option Election" in your annual report.


So I know this is a little after the fact, but I had my retirement planning session with a CAL STRS representative today. I double checked and yes, if a spouse dies at any time after you take your benefits, you revert to the “member only” option.

I probably asked the rep three times, to check and double check.
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Old 09-17-2020, 09:09 PM   #20
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So I know this is a little after the fact, but I had my retirement planning session with a CAL STRS representative today. I double checked and yes, if a spouse dies at any time after you take your benefits, you revert to the “member only” option.

I probably asked the rep three times, to check and double check.
I'd feel better if it were me and the rep showed me where it says that in the official pension documents. Verbal assurances, unfortunately, mean nothing....
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