Spousal Pension NOT optional for some

[Big_Hitter]

My husband and I both have pensions and took the 100% survivor benefits. He is 5 years younger than me but we felt the reduction was necessary.

smart move IMO

 

[ivinsfan]

What the heck just happened? I was reading about pensions then all hell broke loose.

Just a typical day at the office..

 

[oldphd]

Back on the pension and survivor concept, I would reiterate the point that everyone's situation is different. And you need to look at the entire financial picture.

In our case... DW is several years older, has 2 small pensions and SS (reduced by WEP). One pension is from teaching at a private religious school so is not covered by ERISA/PBGC. In other words, it could go away! The other pension is a state retirement system that had a COLA (first was reduced, then went away with decision to reevaluate after 5 years, not looking likely). And, state pension is where we get health care.

She is fully retired and started all. What did we do?
State pension is 100% survivor since the reduction was about 7-8%, I forget. And I rely on the ability to get my health insurance there (she does get a small supplement to hers).
Private pension, which could theoretically reduce or go away if they run low, offered something like 30% reduction for 100% survivorship! Huge difference! We took 0% survivor on that.
Finally, we delayed her SS to age 70 since it was on the small side and we could do Roth conversions of her modest IRA money, and would give me survivor benefits if needed until I draw mine.

I will have a small state pension earned late in life, a bigger SS (only small WEP as I have 27 years in). During times affected by GPO, reduces all SS to zero for either of us. My small pension has a HUGE early draw reduction, so I will delay it until full age/amount. Also wait until then to decide what, if any, survivor amount. Still years away and will depend on where things stand at that time, both money and our health status. Most of my retirement money was pretax, 401k, 403b, 457 dollars.

Probably hard to understand the details here, but my point is that we have (and will have) multiple income streams, none of which sound that big but add up to enough to be of interest. Add in keeping taxes down long term with Roth conversions, and being efficient in drawing down those pretax $, and it was a rather complicated big picture. I spent quite a bit of time going through the options to settle on a strategy that would ensure we'd be fine if we both get to 100, or either of us is fine if one of us got hit by a bus tomorrow.

 

[Telly]

What the heck just happened? I was reading about pensions then all hell broke loose.

Rianne, it's the butterfly's wings effect of Second Chance burning down that cold winter night when the temp was below zero. The next day, both cities were out there with front end loaders trying to peel up the glaciers blocking all lanes of Green Street. The students in the school of CBA wailed "where will we drink now, generations of our family drank there". Alas, no one can predict what subtle nudges will do to the world of chaos. I would like to point out, however, that the insertion of a bit of chaos into this thread did not involve *****, "he who's name shall not be mentioned", nor did it invoke kayaks. I think the fabric has healed over now, so back to Pension disbursement choices, and their effects on Spouses

 

[Telly]

Back on topic... I had a small pension that I could take when I reached 55. I figured, and DW agreed with me, that it was so small, that it wasn't worth cutting it further with any survivor option. When I started it, it would just pay our real estate tax bill. With inflation eating away at it, it falls well short now.

At megacorp, I had a pension that I could take in the not-so-near future with no reduction when I reached the rule of whatever, summation of years of service + age. In the crash of an industry, us 45 and older folks who had more than 10 years in were offered a package, that would add to our age (NOT our years of service, which is where the real $$ are), in effect "giving" us an unreduced pension. A Lump Sum only. BUT... since that target computational point was out at age 55, if you were less than 55 (I was!), the lump-sum amount was stepped back down from the "future" to the then-present by the GATT interest rate at that time. That interest rate was applied to ALL the years needed to step back down from age 55 to then-age. GATT was ~5.48% IIRC. So took a real hit there. I do not remember any paperwork that DW needed to sign agreeing that it was a lump sum, as that was the only choice. I rolled it into my TIRA, along with my 401k, and they have done well there.

So it seems that the forced lump-sum either ignored the spouse-must-agree-rule on survivorship choice, or lump-sums do not trigger it.

 

[whatnot]

We choose 100% survivors on DH pension. He worked for Megacorp for 35 years so it was a decent amount.
He is 4 years older than me and based on family history he believes I may significantly outlive him. It was an easy choice for us.
Also, I had a really good friend whose DH had a very good Federal pension . They chose no survivor option because she also would get a pension from a large University. Her pension was maybe half of his. Plan was for him to get life insurance to cover any risk. He was rejected on first application and he never followed thru with another. He was very fit, non smoker not overweight and exercised regularly. He was only 60 and died about 7 months after he retired. Both his parents were at his funeral.
It caused a huge financial impact as they led a lifestyle based on two good incomes. Very sad to have to deal with loss of a spouse and financial issues that could have been avoided.

 

[Rianne]

Rianne, it's the butterfly's wings effect of Second Chance burning down that cold winter night when the temp was below zero. The next day, both cities were out there with front end loaders trying to peel up the glaciers blocking all lanes of Green Street. The students in the school of CBA wailed "where will we drink now, generations of our family drank there". Alas, no one can predict what subtle nudges will do to the world of chaos. I would like to point out, however, that the insertion of a bit of chaos into this thread did not involve *****, "he who's name shall not be mentioned", nor did it invoke kayaks. I think the fabric has healed over now, so back to Pension disbursement choices, and their effects on Spouses

How is it that makes sense to me? Reminds of college days at 5 a.m. after a long night of partying. Someone spouts philosophy that we all understand. BTW, do I know you? Now! Back to pensions, I'm too old for that stuff.

 

[Chuckanut]

I have a public pension and it requires the spouse to agree to not getting any survivor benefits. As a single person that does not affect me. But, if a charming lady who wants to get married manages to put a bridle on me, then I can change to survivor benefits.

What I really want is for that charming lady to have her own ample pension so we can both collect 100% and go a bit wild spending the money.

 

[brett]

The commuted pension amount on my DB plan did not require my spouses signature.

The joint options required her signature-whether it be 0, 60, or 75 percent.

 

[Raygun99]

We had similar choice at age 58 retirement. Non COLA pension. We did the math and decided to take a 500K 30 Term Life policy. Pay off the house quicker with the difference and if I don't make 88 she will be very well off. If not she will stil be scure with other investments.

 

[indiajust]

Yet another reason I am grateful to have rolled over pension to IRA, and then IRA to Roth. I need never see a bridge like this, much less have to cross it.

 

[Ebendana]

15 yrs certain/life

The reason I did not take a spouse 50/50 was because I could not stand the thought of the pension going back to the company if I were to die young...so, I took the 15 yr certain/life and have adequate life insurance for my spouse should I pre-decease him. I was the primary breadwinner, and my pension and SS is enough to pay our basic expenses, savings is for unexpected. I could have done a $450K lump sum, but I did not "trust" myself to manage it for a long retirement. I retired at 58 yrs old and did the math...at the 15 year mark my pension pays me about $375K...if I live 30 years I come out way ahead. Since I did not contribute to this, it was all company contributions, I felt that this was the best choice. If by chance both my spouse and I die within the 15 years, then my adult children get the monthly amount until 15 years is over. If I outlive my spouse (he is 3 years older than me) at that time I will most likely cancel the life insurance policy. There was not an option for a joint/survivor life with a period certain time frame, so I made the above decision...but it was after ALOT of discussion with my DH.

 

[isisdave]

Well no problem here, neither of us has a pension, although you could apply this to an annuity plan too. Life insurance is an alternative, of course.

My parents had a friend who died early, and they were astonished he had picked no survivor benefit. Mom immediately checked up on Dad's plan. All good.

 

[brett]

I think if someone does not have any financial smarts or sense of financial responsibility for their spouse by that age then it is too late to expect any different outcome or even that the person would have the sense to seek out advice.

In my experience some people don't 'get it', and they never get it with age.

 

[Aramis]

If someone is taken in by the allure of a higher monthly amount option, it probably means their entire retirement plan is shaky and sub-optimal. Where there's smoke............

 

[imnontrad]

So sorry to hear this. Is she getting SSDI? If so, her best option may be to continue on that until she reaches her FRA and then switch to the "surviving spouse" benefit equal to what his SS benefit would have been at his FRA.
if by chance her lifespan is shortened by her disability, she could apply for the "surviving spouse" benefit earlier, but the amount will be reduced for filing for it before her FRA.
In addition, if she/her husband was a military veteran, she would be eligible for VA benefits including possibly the "Aid and Attendance" benefit.

 

[Vacation4us]

My ex couldn’t qualify for life insurance when my kids were little. I said “what will I do if you die?” ( back then nurses didn’t make much) his answer was “what do I care I’ll be dead?”.

Not the reason we divorced, I did mention in another thread I was a slow learner with ex.

I am sure his attitude was not individual. I didn’t understand then or now. The same applies for the spousal benefit of a pension in my opinion no matter the cost.

 

[mountainsoft]

How sad...

I've mentioned this before, but we are planning to take the 100% survivor option on my wife's pension. 0% single life is only $300 more per month than the 100% option, but would be a loss of over $2700 per month if my wife died first.

I am five years older than she is, but she has already had a number of health issues. I'm generally in good health, though that can obviously change in an instant. Statistically she should outlive me, but historically I wouldn't take that chance.

 

[CardsFan]

OP here, just to let you know I am following and reading.

Not much more to add. The family is helping her work through a few things (like finding the titles to the vehicles). So another recommendation, probably not needed with most here, make sure you both know where all the important papers are.!

 

[gooddog]

"If you can, counsel them." Agreed, but most don't want to listen. More often than not, when we try to educate someone on finances, we are simply one in a string of people who have said the same thing - only to be ignored.

 

[Heather G]

We have 2 years to decide on pension. I find these numbers confusing:

75% Survivor Annuity - $2763 monthly, if one dies $2072

100% Survivor Annuity - $2626 monthly, one dies $2626

50% Survivor Annuity - $2926 both live, one dies $1457 - $1469 difference for survivor.

This seems like a no brainer. Why would someone work their whole life then chance losing all of the pension b/c of early accidental or health death? This show over $1000/month survivor benefit loss between 100% an 50%.

The only way this doesn't work (sometimes) is if one spouse is quite a bit younger than the other. I'm 17 yrs younger than my husband. He was only offered the 50% and 100% options, or full pension no survivor. Because of our age difference, should he die, MY amount would be reduced an additional 30% (they gave me 2 yrs, then subtracted 2% for every year I was younger). Hence, your 100% scenario would have been $1,838 ($788 less) and 50% would have been $1,020 ($437 less) in my situation. His full pension, no survivor, was considerable and we took out a large life insurance policy (it was pricey, but cost less than I would have lost). He's retired 20 years now (I quit working when he retired), I just got my pension (from when I worked) and SS and we decided to cancel the ins policy. It could have turned out differently, I know. But we have more today than we had 20 yrs ago and we have enjoyed a good life (to us). And, we feel like we hit the jackpot with 2 new income sources and saving on the ins premium.
I was included in ALL these discussions/decisions.

 

[zippy2020]

I'll add my mite to this thread:

Spouse had union job for 42 yrs so state paperwork required I sign off on ANY decision he made about his pension. We chose the 100% Survivor's Benefit, which came out to about 11% reduction in his monthly benefit. I believe there were options for 25% and 50%, and of course, zero claiming.

Irrevocable, but if I die he has the choice of getting the 11% added back to his pension, OR, signing a SB to someone else (anyone he wants). Again it is a decision of 100%, 50%, or 25% SB.

Also, an interesting thing happened, which we fortunately discovered by accident:

On our marriage, it took him a few years (don't we all procrastinate at times?) to change the beneficiary on his 401k from his mother, to my name. Submitted the paperwork and change went through, no problems.

About 15 yrs later, the state upgraded its software system. Changeover went fine, new portfolio reports were much easier to read and more informative.

Everything was great until about 3 yrs after that, when I was going through some of the annual paperwork for taxes.

....and discovered that somehow, the beneficiary designation had reverted BACK to his mother! GIGO strikes again, lol.

Apparently the new software install had dropped his COB. We quickly re-submitted new paperwork.

But it was a good reminder - check up even on the small details, once in a while. You never know.......!

 

[Focus]

The other side of the coin:

In my case, I chose 50% for my spouse. Then we divorced. Needless to say, I now wish I had chosen 0%, particularly since I'm not allowed to change the beneficiary. It's a very small pension, though, so in the end I guess it matters little.

 

[bpgdeg1234]

The other side of the coin:

In my case, I chose 50% for my spouse. Then we divorced. Needless to say, I now wish I had chosen 100%, particularly since I'm not allowed to change the beneficiary. It's a very small pension, though, so in the end I guess it matters little.

Can you please elaborate a bit more on this. You wish you had taken 100% J&S or 100% Single Life and why?

 

[PandaBear]

We look at all the options and decided that the 100% survivor benefit was the way to go. In our case, the difference was just too small to justify taking a lower percentage for the survivor. DW was fully informed and involved in the decision.

Both dh and myself have pensions. In both cases we chose 100% survivor. My dh’s has a greater reduction but the peace of mind of knowing we both would have the income is worth it.