Spousal Pension NOT optional for some

[Old Microbiologist]

CardsFan - you have to remember though that the highest the dependent spouse can receive is 55% of the monthly amount. The premium for 100% coverage is 6.5%. In my case my dependent spouse was also active duty when I retired but was locked up as Commander of Site R (remote Pentagon Operations center buried up in the mountains of Maryland) and incommunicado for 6 months as part of the DoD preparation for the Y2K rollover if you recall those years. I retired in October 1999 so she was unable to even be contacted about my retirement until February. I was mandatorily retired as prior enlisted for 12 years and passed over twice so being over 20 years in a non-promotable status then mandatory retirement. I had 26 years at that point.


The nice thing was my spouse at that time (my second ex-wife) declined any retirement in the divorce (she is a colonel now) so it now all goes to my 3rd wife. My first wife died in 2005 so no issues there.

 

[Focus]

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.

Sorry! Should have written 0%. Corrected.

 

[Skitso999]

Because of this very issue, I cashed-out my pension from my former company (Boeing). I don't trust them in any case to keep the pension going through my retirement years. I've been retired for one year so far and the money is already growing far more than it ever did when it was in their hands.

I'm also waiting for the "second bottom" of the stock market during the upcoming national shutdown [MOD EDIT] before I put that money to work in index funds.

And, when both of us have kicked-the-bucket, our children and their children will still have some money from those former pension dollars.

 

[RVplusDog]

Re: medical for surviving spouse on “disability” - if it’s SSDI, then Medicare should have kicked in six months from onset date. If it’s private disability, different story.

 

[Sunset]

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.

IF the pension value was considered in the division of assets, then this would be double dipping and terrible.

Are you SURE it cannot be changed ? , what if you re-married ?

 

[Focus]

IF the pension value was considered in the division of assets, then this would be double dipping and terrible.

Are you SURE it cannot be changed ? , what if you re-married ?

Exactly. Believe me, I was shocked. The company said that the beneficiary could only be changed before I started taking the monthly payments. Afterward, impossible.

 

[Aramis]

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

Im pretty sure he means 100% single. No sense living the rest of your life receiving less pension than you could have and knowing that you have to do that because of an ex you dtest!

 

[Focus]

Im pretty sure he means 100% single. No sense living the rest of your life receiving less pension than you could have and knowing that you have to do that because of an ex you dtest!

Yep, that's what I meant. I corrected it. In my case, that would have been better. But it's a very small pension and I don't detest my ex, so I'll live.

 

[rothlev]

I think in today's world, the situation goes both ways. A woman should be just as concerned about taking care of a man financially if she has a DBP where she can name him as a 100% survivor beneficiary. I know the government rules require both males and females to have their spouse sign off if they want to pick the no-benefit option. And that's as it should be.

We were shocked that here in Illinois, the Teacher's Retirement System offers no 100% survivor benefit for the surviving spouse. There is a 50% option, so that's the protection I have from DW's pension should she predecease me.

Federal Civil service does not do 100% either. I think it is in the ballpark of 55% or so, based on the unreduced pension amount. Should I go first DH gets a 10% raise as he no longer has to cover me.

 

[deserat]

OP here.

Unfortunately, I agree with you.

I think it depends on the situation. In my case, both my ex-husband and I were eligible for almost equivalent military pensions only they started at different times (his before mine and for a 15 year stretch longer). Just one pension covered our lifestyle costs and both were COLA'd. For that gap in time, my ex-husband took out term insurance that covered the difference between the time gap.

If there is more of a disparity in the income potential and pension benefits, then what-ifs should be discussed with all of the options laid on the table and analyzed.

 

[latexman]

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%.

Right, 0% survivor is $3277/month. But a life insurance policy at our age? That is interesting, we need to look into that strategy. I have no idea how much a life insurance policy would cost at 62.

The difference between 0% and 100% is $651 a month. It would take a policy of $110,000 paid out and invested at 4% to cover $651 a month for 20 years, or, if age 65, to age 85.

I'm confused, and I will have to make this decision in a couple years. Wouldn't one need to replace $2626 monthly to make it an apples-to-apples comparison between Single Life Annuity and 100% Survivor Annuity?

 

[brett]

If you check out the insurance route....

-insurance payouts are not taxable

-you would not need to buy coverage for the full value of the commuted pension value as at retirement date since this number, assuming stable rates, decreases each year as the pension would be drawn.

 

[latexman]

Agreed, but one does not know when the grim reaper strikes, right? So on the first insurance policy before triggering the pension, shouldn't it cover an early departure, i.e. the $2626/month for the longest time to the end of the planning period?

At that time, the difference between the payouts for Single Life Annuity - 100% Survivor Annuity just didn't make sense to me. That doesn't have much to do with how much the survivor will need from the point of being widowed to the end of their planning period.

Maybe I need to research it more.

 

[Rianne]

This brings a 2nd observation to mind. One works 30 years for a decent pension and it all goes up in smoke upon early demise, if you take the Single Life Annuity. Why not take 100% survivor for guaranteed pension and buy a term life policy for extra protection.

The average healthcare expenditure in retirement is $250K? Just imagining a situation where me (DW) left alone, needs in home or best independent/nursing home care. The value of our portfolio diminishes pretty quickly when confronted with healthcare costs.

I don't know and should research the cost of term life with pre existing condition. Mine is cancer, DH is diabetes (although it's controlled he has that DX and it sticks forever).

 

[latexman]

^ I had similar thoughts. I went to 3 online term life insurance calculators. I'm 63 and they will not quote over 55-58 years of age. If I extrapolate to my age, #1 it is not affordable, and #2 my 100% Joint and Survivor pension is looking REAL good.

 

[brett]

I can well imagine the issues involved in potentially changing the joint survivor.

The first would be any age differences from the previous joint. A large age delta would change the entire payout formula.

The second could be health issues. Clearly if the original joint survivor was determined to have a terminal health issue the pension provider would hardly we in favor of substituting another-whether it be a new spouse or common law spouse.

 

[Sunset]

After reading this thread, I've realized anyone considering filling in some gap with life insurance should sign up and get the life insurance prior to committing to the pension choice.
It seems to me, it will be harder/more expensive than some folks think to get the life insurance.

 

[Math]

I researched my pension options rigorously. As a public school teacher in one of the 15 states where GPO and Windfall offset apply, I knew that I cannot draw on my husband’s SS due to my pension. We chose a plan that would let him have 100% of my pension for up to age 70 if I died. This would let him draw his full SS at age 70. His SS at this age is approximately equal to my pension. It only reduced my pension $10 per month and was cheaper than an insurance policy. We are using our 401 K assets for emergencies until he can draw SS. It can be a maze, sometimes.

 

[MarieIG]

This brings a 2nd observation to mind. One works 30 years for a decent pension and it all goes up in smoke upon early demise, if you take the Single Life Annuity. Why not take 100% survivor for guaranteed pension and buy a term life policy for extra protection.

The average healthcare expenditure in retirement is $250K? Just imagining a situation where me (DW) left alone, needs in home or best independent/nursing home care. The value of our portfolio diminishes pretty quickly when confronted with healthcare costs.

I don't know and should research the cost of term life with pre existing condition. Mine is cancer, DH is diabetes (although it's controlled he has that DX and it sticks forever).

Cancer is a hard one. When I was looking they wanted me to have completed treatments more than five years previously. I don't know if they consider monitoring - treatment.

I have no issue with J&S and a policy - but often if you wait until retirement time to look, it starts to get pricey.

 

[iloveyoga]

This brings a 2nd observation to mind. One works 30 years for a decent pension and it all goes up in smoke upon early demise, if you take the Single Life Annuity. Why not take 100% survivor for guaranteed pension and buy a term life policy for extra protection.

The average healthcare expenditure in retirement is $250K? Just imagining a situation where me (DW) left alone, needs in home or best independent/nursing home care. The value of our portfolio diminishes pretty quickly when confronted with healthcare costs.

I don't know and should research the cost of term life with pre existing condition. Mine is cancer, DH is diabetes (although it's controlled he has that DX and it sticks forever).

This situation is a great fit for the 100% survivorship option, in my opinion.

 

[Theo]

If someone's primary source of retirement income will be a pension and the spouse does not have any other significant source of income should the pensioner die, not taking a j&s option of 75% or greater is fiscal malfeasance unless they have a substantial insurance policy in place to replace the pension income.

 

[hausfrau]

This is easily explainable for those who need to take the spousal option but fail to do so.

You cannot fix stupid.

Both on the part of the retiree who asks his or her spouse to agree and on the part of the spouse who signs it away without understanding the potential consequence of doing so.

I like to think that I'm relatively educated on financial things, but I'll admit that I had no idea about the spouse having to sign off on survivor benefits until I asked a question here last year about relying on a pension. I never had a pension while working and don't know many people who have them either. The monthly pension amount is pretty small, but I'm glad I was prepared. We got the pension paperwork last month, and I think the default option was 50% for the survivor. We chose 100% though and I signed the paperwork in front of a notary.