Relying on a pension?

[Offgrid Organic Farmer]

That is horrible.

In my opinion, each spouse should take the other into consideration when planning their respective retirements.

Even on this Board, while some spouses are very cognizant of the survivor's needs, with others, it's all about what works for them - with seemingly no thought whatsoever as to how their spouse would manage if they died first.

With my military pension, they offer a Survivor Benefit Plan [SBP] but I as the servicemember am not the person who decides. My spouse was required to attend a briefing on it, and then she decided how much of my pension should pay into SBP for her benefit.

At one level of contribution she would get 10% of my pension, at another level of contribution she would get 20%, etc, all the way up to 100% all depending on how much of my pension, my wife decides should go into SBP.

If a servicemember expected to die soon, it would be a reasonable decision to pay into SBP at the highest level.

I did not foresee dying anytime soon, so my wife decided not to elect to put any of my pension into the SBP.

 

[rk911]

...In my opinion, each spouse should take the other into consideration when planning their respective retirements...

sounds like he did...just not in a good way.

 

[samclem]

At one level of contribution she would get 10% of my pension, at another level of contribution she would get 20%, etc, all the way up to 100% all depending on how much of my pension, my wife decides should go into SBP.

Just to clarify: In the DoD Survivor Benefit Program, the highest amount the survivor can receive is 55% of the retired servicemember's monthly check. The terminology that is used to explain the program is a little confusing: The amount of SBP insurance can be elected to "cover" zero to 100% of the retirement check, but the surviving spouse will receive 55% of whatever amount is elected.

From a USN SBP site:

The annuity paid to a surviving spouse or eligible child is 55 percent of the base amount elected by a retiree, or the projected retired pay on the date of death of active duty or eligible reserve component servicemember.

For military spouses/retirees, the SBP is an economical, solid form of insurance that many find to be unmatched by any type of private insurance. Every case is different, so for those affected it is a subject worthy of careful research. There's more in this good thread on SBP.

If a servicemember expected to die soon, it would be a reasonable decision to pay into SBP at the highest level.

I did not foresee dying anytime soon, so my wife decided not to elect to put any of my pension into the SBP.

I guess that's one way to decide. I didn't have any particular precognition about by my departure, so we based the decision on other factors.

 

[Offgrid Organic Farmer]

Just to clarify: ....

I did not attend the briefing, my wife did.

My understanding is from what my wife told me about the problem.

Whether 'we' paid into SBP is her decision, not mine.

We wanted to 'live' on my pension, so she wanted us to have the most that we could get.

My wife has had five heart attacks. We anticipate that she will likely die before I die.






The 20-year military pension is only 50% of 'base-pay'. My 'base-pay' on Active Duty ran around a third to a half of my take-home pay. So the pension is more like 25% of take-home pay for US servicemembers.

 

[Alan]

I was fortunate that my company had a website portal where you could see your pension estimate at various ages, plus the reductions in payments should you choose 100%, 75% or 50% survivor. Seeing the difference between 100% and 50% we decided to take out life insurance on me for enough money to buy an annuity to replace 50% of my pension when I die. The pension is fixed, no COLA. At age 48 and in excellent health the premiums on a policy were less than the difference in pension payments so we opted for 50% survivor to get the higher pension when I ER’ed at age 55. It has worked out really well for us.

 

[Walt34]

When I was young I worked in employee benefits for a large steel company. My least favorite part of the job was telling widows that there husband had chosen no survivors benefits.

I worked with a guy who I had thought was a nice guy. He retired, had The Big Ache a few years later, and I learned that he had done that to his wife who had been a SAHM for 20 years or so. This was of course before the law was changed so the spouse had to sign off on the retirement choices. She had no idea the income was going to be shut off like that.

That's a pretty crappy thing to do to someone.

 

[samclem]

I worked with a guy who I had thought was a nice guy. He retired, had The Big Ache a few years later, and I learned that he had done that to his wife who had been a SAHM for 20 years or so. This was of course before the law was changed so the spouse had to sign off on the retirement choices. She had no idea the income was going to be shut off like that.

That's a pretty crappy thing to do to someone.

Indeed. DW was a SAHM, and as far as I was concerned that USAF retirement I was gonna get was earned by >us<. Every couple is different, of course, and there can be good reasons to make a different choice on these survivors benefit packages, but we took every available cent. It didn't hurt that it was, actuarially, a good deal for us.

There's a small cottage industry near military bases with [-]FAs [/-]sharks who try to convince retiring soldiers and their spouses to forego the govt SBP and instead "take what you would have spent on that to instead buy term life insurance and investments through me." They've got the rosy projections with the ever-rising "future balance" line, and the promise that "this way you won't be throwing that money away if you outlive your spouse." You can look high and low in those pitches and any mention of inflation is in the very finest of print, if it is there at all.

The most charitable way I can spin this is that the "advisors" themselves are too ignorant to know the truth. But I think reality is worse than that.

 

[athena53]

When I was young I worked in employee benefits for a large steel company. My least favorite part of the job was telling widows that their husband had chosen no survivors benefits. These were usually women 55 and up whose husbands had lied to them. Many had never worked. So the pension died with the husband. People would go into shock, start crying, asking me what they were going to do. At 22 I had no clue. Also some of these ass hats had left their life insurance to someone else.

That happened to my step-Grandma. When her first husband died, his pension stopped and her kids told her if she wanted to live decently she'd better remarry. So she married Grandpa. He treated her (and her kids) VERY well. It was a sore subject with my mother (his daughter)- not because she cared about inheriting anything but because he'd been darn stingy with my late grandmother.

But, to get back to the OT- I have two pensions, each about $900/month, no COLA, and when I signed up for them if I chose anything less than a 50% survivor benefit, DH needed to sign a waiver in the presence of a notary. I'm glad that's the law now.

 

[Perryinva]

If the pension doesn't have a survivor option at a reduced payout, you can divert part of it to a life insurance policy for you. Then you could count on it.

Yup, that's what I did. My pension had a 50% death benefit option, which reduced my pension by. $240/mo, then would be about $1700/mo to DW in case of my death. Thats $20k/yr. So I kept full pension amount, with zero death benefit & got $500k life insurance for $165/mo, good though age 70, instead. Goes up to $200/mo through age 80. DW is older than I am by 6 years, so if she dies first, I drop it or I reach 80& she is 86, then we most likely can drop the insurance, anyway. Either way, we are ahead, unless we are dead, of course.

 

[njhowie]

Do you have the option of taking a lump sum payout? You mention the employer is not very stable. If you took a lump sum payout, you could self manage or purchase an immediate annuity which could provide similar payouts (maybe a bit lower than the pension) but additionally provide survivor benefits.

 

[hausfrau]

Do you have the option of taking a lump sum payout? You mention the employer is not very stable. If you took a lump sum payout, you could self manage or purchase an immediate annuity which could provide similar payouts (maybe a bit lower than the pension) but additionally provide survivor benefits.

I don't think they do. It's the current employer is the shaky one. The company with the pension is a pretty stable megacorp. We get a pension statement every year and it's pretty well funded.

 

[njhowie]

I don't think they do. It's the current employer is the shaky one. The company with the pension is a pretty stable megacorp. We get a pension statement every year and it's pretty well funded.

Ah, I see.

In any case, there should be some way of getting survivor benefits through the plan directly, or some other mechanism to approximate it even if taking a lump sum is not an option. The suggestion just above mine about purchasing life insurance on him should also do the trick as well.

Also, generally pension plans have websites where you can log in and run different scenarios to see what your payout will be. You input start date, the type of payment/annuity schedule you want, and then it spits out your monthly payout and any terms that go along with it. You should see if you can get access to whatever site they are using. Many big corps have their pensions administered through Fidelity (mine does) and they provide a good tool for running estimates.

 

[Running_Man]

I don't think they do. It's the current employer is the shaky one. The company with the pension is a pretty stable megacorp. We get a pension statement every year and it's pretty well funded.

For a megacorp it almost certain there will be a range of options that will be offered. If it is 20K per year for just your husband it will probably be in the 16-17K per year for a pension that is 100% for the combined lives of you and your husband. You should definitely do this instead of the 50% J&S as you are six years younger than your husband and likely to live 12 years more. Some pension plans adjust the survivor annuity based on the age of the survivor at the time the pension is taken, but the option to get a survivor benefit is extremely valuable in the case of a younger spouse as the survivor. That amount alone could fund healthcare over the course of your retirement.

 

[hausfrau]

For a megacorp it almost certain there will be a range of options that will be offered. If it is 20K per year for just your husband it will probably be in the 16-17K per year for a pension that is 100% for the combined lives of you and your husband. You should definitely do this instead of the 50% J&S as you are six years younger than your husband and likely to live 12 years more. Some pension plans adjust the survivor annuity based on the age of the survivor at the time the pension is taken, but the option to get a survivor benefit is extremely valuable in the case of a younger spouse as the survivor. That amount alone could fund healthcare over the course of your retirement.

It might be a little less since I am 12 years younger, but maybe the 75% option. I didn't see a website, but I'm sure he can give them a call. I still can't believe I completely ignored this whole part of our retirement planning. It will certainly help with our budget, that's for sure.

 

[googily]

When it was clear that DH wasn't getting better from his cancer diagnosis, our Megacorp came to us and said that, since he was 55, he could file for early retirement and choose the 100% J&S option for his pension. Then they would just keep filling for an extension of his retirement date. Alas, no extensions were ever needed, but it did maximize the survivor benefit I now get (even though it was shaved down a lot because of the "early" retirement). I'll then get my own as well at 65.

 

[googily]

(Should add that it maximized it because otherwise the default was 50% and wouldn't have started until he would have been 65.)

 

[meleana]

Can he take a lump sum? That is what we will do with my husband's. He can take $1500 per month- has lots of other options for the annuity as well- or he can take somewhere around a $200,000 lump sum (hopefully this won't change- he retires the end of this year). We will roll it over into an IRA and invest it.

 

[ripper1]

it's like hitting the lotto that pays a fixed amount per month for life

+1.....Then add on a 3% compounded COLA....now that really rocks

 

[ripper1]

Sort of...except there was quite a bit of work and a LOT of gnashing of teeth for 22 years to "win" that lottery. Ed McMahon sure as hell didn't show up and say, "YOU WON!!!"

Yep....30 years in a ditch in Chicago and horrible weather and gangsters to deal with.

 

[ripper1]

Damn, right. Especially one with a cola, and big enough that you dont even spend all of it each month. It sure papered over a lot of my dumb money wasting mistakes in my more youthful years.

+1

 

[Which Roger]

My MegaCorp offered annuity or lump sum. For the annuity, default was 50% survivor benefit. Other options were 0% and 100%. Spouse had to sign off if I were to choose anything other than 50%.

 

[Big_Hitter]

My MegaCorp offered annuity or lump sum. For the annuity, default was 50% survivor benefit. Other options were 0% and 100%. Spouse had to sign off if I were to choose anything other than 50%.

that's strange - I thought the 100% J&S didn't require a waiver. Maybe this is plan-specific?

 

[RAE]

You aren't kidding. I call it "wake up pay." As long as I wake up on the 1st of every month, I am getting PAID!!!

Yep. Put another way, I always tell DW that my only real job now is to stay "upright and breathing", so that I can collect that pension check each month.

 

[ripper1]

Yep. Put another way, I always tell DW that my only real job now is to stay "upright and breathing", so that I can collect that pension check each month.

Haha.....My wife told me she is going to keep me on life support indefinitely....

 

[ExFlyBoy5]

Yep. Put another way, I always tell DW that my only real job now is to stay "upright and breathing", so that I can collect that pension check each month.

I have been told the same thing. In regards to the government SBP, we elected the full amount as the value (as far as I am concerned) is decent for the cost. I still have a term policy as well that runs $19 a month, so the DW will be just fine (financially) if/when I check out. One piece of advice my Dad told me that I think is great is, "don't ever be worth more dead than you are alive" so I keep the insurance at a reasonable level; no multi-million dollar benefits here!