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Old 09-07-2020, 12:32 PM   #21
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100% survivor was my initial inclination as well because of the young wife and kids.

Not sure what state you are in but using TX annuity pricing per immediateannuities.com, the premium needed to provide the $2,868 single life benefit would be ~$675k and the premium needed to provide the $1,800 joint life benefit would be $625k... so the single life benefit is a better value.

A premium to provide a $1,800/month benefit for a 43 yo woman would be $561k and a 53 yo woman would be $500k... so if you take the single life benefit and keep the $500k of life insurance that you don't really need given your assets, then the life insurance death benefit will be close to what would be needed to buy a SPIA to replace the $1,800/month joint life benefit if you pass away before the term life runs out.

So I think taking the single life benefit and keeping the term life insurance vs taking the 100% joint benefit and dropping the term life insurance is probably pretty close to a wash depending on what your term life is costing you.

For SS, visit opensocialsecurity.com and click on the little box near the top of the page and clisk on the mortality, children and discount rate boxes and follow the prompts.
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Old 09-07-2020, 12:33 PM   #22
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And you also need to do an Income Tax analysis.
2868*12= 34,416 (your first option above)
1800*12= 21,600 (your social security at age 62)
Pension +SS = 56,016 per year.
Other Income= ? No taxable interest, dividends, or capital gains from investments?
Expenses 24,000-48000

BUT: up to 50% of your social security will be taxable because your pension is more than the base amount of $25,000 (head of household). So you need to account for it in your expenses. Then, when you turn 65, Medicare kicks in, and your income tax will drive the amount of premium you pay. Currently anything below $87000 modified adjusted gross income gets the base premium, more than that and there is a surcharge.

Sources: IRS website. Medicare website. Search for how much of social security is taxable. On the medicare site: what is the part B premium and what is IRMAA.
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Old 09-07-2020, 01:27 PM   #23
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I took the 100% survivor for my pension choice. Wife also has a pension but itís tiny and if I pass first donít want to put her in a financial crunch.
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Old 09-07-2020, 02:27 PM   #24
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I would normally agree with taking the 100pct survivor but in this case I don't bc its non colad. If you take it all and invest the diff, it will grow. But 1800 a month 40 years certainly will not "take care" of the survivor
The survivor benefit is guaranteed. Your investment is not.

You also have no idea how long he will live. (Heaven forbid) He drops dead one year in - then what? No survivor benefit, no investments. SOL!
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Old 09-07-2020, 04:42 PM   #25
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My Husband took the 75% survivor benefit when He retired . He died two years later so in his case it was a very good idea .
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Old 09-08-2020, 06:06 AM   #26
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My initial inclination would be to take the largest survivor benefit to protect the younger spouse in case of an early death. The non COLA'd nature of the annuity and the existence of $500K term for ten years adds complexity. Others have suggested taking the max and investing the difference (~12K/yr). Could the term be decreased and extended after ten years and, if so, what are the costs? At what point would the investments likely build up to the point that the couple could start spending the difference?

I suspect I would still come back to the greater protection of a guaranteed $1800/month but running the scenarios would make me more comfortable.
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Old 09-08-2020, 09:23 AM   #27
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You can submit basic data to various sites and get an estimate of your shelf life. That is what we do to get another important factor for the equation.

I'd place importance on the age of spouse and children too. The total dollars that might be collected is outweighed IMO by the projected standard of living.
Just tried two online sites. They say 76+77 years old.
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Old 09-08-2020, 09:24 AM   #28
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I took 100% survivor for DH and I, that way we knew a set budgeted amount we could count on for our lifetimes.
I ran FireCalc for all of our possibilities and felt most comfortable with that choice.
Have you run Firecalc?
SS for you and your kids adds a pretty stable leg to your 3 legged table (pension, SS, investments).
I ran it and it said zero failed cycles.
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Old 09-08-2020, 09:28 AM   #29
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SS strategy should be in the calculations, which makes is quite a bit more complex. Delaying SS is generally the cheapest, cola'ed annuity purchase you can make. How long will your kids draw before 18 ?

Just as a different scenario - what about taking the single life annuity and using the "extra" money to delay your SS ? That also benefits your wife, how much depends on her own SS record. Complex problem for sure, but it is solvable. The important consideration is to not treat the pension without consideration of SS (or vice versa). They have to be considered together to find the optimal solution.
The childrens social security will be for 8 years. It basically ends the same time as my life insurance ($500,000 for $1240/year) at age 70.5. I can't extend the policy.
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Old 09-08-2020, 10:04 AM   #30
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I think the reason these decisions are hard is because they do the math beforehand and make all of the choices pretty close. So the approach would be to know what they knew when they made the offer, then see if you have any facts they didn't consider. So if they had the wife's age, your age, etc, those would have no push, one way or the other. But they probably didn't know about kids. They didn't know your family longevity prospects. They didn't know how health conscious you both are, etc. Those push on the directionality of the decision. Then there's the elephant in the room: your assumption about interest rates over the long term; if you think you will get paid-off with worthless (worth less) dollars, pull it in now.
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Old 09-08-2020, 11:31 AM   #31
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I think the reason these decisions are hard is because they do the math beforehand and make all of the choices pretty close. So the approach would be to know what they knew when they made the offer, then see if you have any facts they didn't consider. ...

Then there's the elephant in the room: your assumption about interest rates over the long term; if you think you will get paid-off with worthless (worth less) dollars, pull it in now.
You had good points, but I question that final one, because you don't consider it with respect to the bolded part above, like you did the other factors.

Short of deflation, there's no doubt you will get paid off with dollars that are worth less. They know it and you know it. The question is whether you know more about future interest rates than they do. That seems doubtful to me.
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Old 09-08-2020, 12:05 PM   #32
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I dwelt less on the math of "which option will get me the most money" and more on the math of "which option will be best for my spouse, without them having to deal with investments, etc.". For that reason we chose 75% survivor. DW wanted that amount instead of 100% as she wanted us to have more money now while I am alive. My pension is large enough and expenses low enough that 75% survivor + my SS survivor benefits will cover her regular expenses should I die first.
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Old 09-08-2020, 06:20 PM   #33
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there is a significant haircut for the 100J&S form of payment for a reason - the payments are expected to have extremely long tails

like others have said, the decision will depend on your risk tolerance and general insurance philosophy; those forms of payment look actuarially equivalent using some interest rate and mortality assumption. Where those disclosed?

when my dad retired in 92, i advised him to take the 100J&S but the haircut was much less significant, as there was only 1 year age difference. My mom is still receiving the pension. YMMV bigly
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Old 09-08-2020, 10:21 PM   #34
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Single life annuity $2,868
100% survivor 1800 a month beneficiary gets 1800
I'm turning 60 and my non- working wife 43.
That's quite a difference. The estimates on my wife's pension only vary by a couple hundred dollars between single and 100%. So we will be opting for the 100% survivor option.

With 1000 dollar a month difference, I would research how much a life insurance policy would cost. If she dies first, you continue your pension. If you die first, she would receive the life insurance payment. Just make sure the coverage would provide equivalent income if you die (For example: 1800 x 12 months x approx 45 years for her would be around a 1 million dollar insurance policy, if my quick math is correct). If your policy premiums are less than the 1000 dollar a month pension difference, it should work out.

That said, opting for the 100% survivor is probably the simplest option and one less thing for your wife and kids to worry about if you die.
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Old 09-08-2020, 10:31 PM   #35
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That's quite a difference. The estimates on my wife's pension only vary by a couple hundred dollars between single and 100%. So we will be opting for the 100% survivor option.

With 1000 dollar a month difference, I would research how much a life insurance policy would cost. If she dies first, you continue your pension. If you die first, she would receive the life insurance payment. Just make sure the coverage would provide equivalent income if you die (For example: 1800 x 12 months x approx 45 years for her would be around a 1 million dollar insurance policy, if my quick math is correct). If your policy premiums are less than the 1000 dollar a month pension difference, it should work out.

That said, opting for the 100% survivor is probably the simplest option and one less thing for your wife and kids to worry about if you die.
Especially if OP dies at age 71 or older, when insurance has ended and she is 54.
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Old 09-10-2020, 02:13 AM   #36
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there is a significant haircut for the 100J&S form of payment for a reason - the payments are expected to have extremely long tails

like others have said, the decision will depend on your risk tolerance and general insurance philosophy; those forms of payment look actuarially equivalent using some interest rate and mortality assumption. Where those disclosed?

when my dad retired in 92, i advised him to take the 100J&S but the haircut was much less significant, as there was only 1 year age difference. My mom is still receiving the pension. YMMV bigly
I've attached the relative valuation
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Old 09-10-2020, 05:35 AM   #37
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Just tried two online sites. They say 76+77 years old.
I put your annual numbers into Flexible Retirement Planner (FRP). Had to guess at a few things.
20/80 AA - Risk Averse (6.0%/4.3%)
3.0% Inflation
$50K Spending (Flexible)
$400K Taxable
$1,200K Deferred
$400K Tax free
$21,600 SS
$9,600 SS for 10 years

$21,600 Pension (until 90 for spouse)
or
$35,520 Pension alternative (18 years)

$100,000 RE Down payment in 4 years
$36,000 annual RE PMI starting in 4 years for 20 years

You leave the building at 78, spouse at 90.
FRP says you'll be fine with either pension choice, 100% Success with a flexible spending policy. Of course the results are not predictive, and I'm a rank amateur and not pro.

Inflation is the killer. If we have 4% average in the future instead of 3%, that hits all plans like a ton of bricks.

How about medical and higher education for children?
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Old 09-10-2020, 05:50 AM   #38
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Another option to consider if you can pass underwriting is to take the single life option and create a term life insurance ladder with a death benefit sufficient to provide your DW with a SPIA with replacement income if you pass. You could use your current term life insurance policy as one of the legs of the ladder.

You use a ladder because the older your DW gets the cheaper the SPIA costs because it expected payout term is shorter.

The other benefit of the ladder is you can extend protection beyond when you current term life policy ends.

As long as the cost of the protection is less than $1,000/month then you are ahead.

https://obliviousinvestor.com/ladder...ance-policies/
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Old 09-10-2020, 07:28 AM   #39
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With a 43 year old wife, and 2 young children, I believe the 100% option is the only way to go to ensure their comfortable future. I can't imagine her heartache if something unfortunate would happen to you in your first years of retirement, let alone the financial monthly strain without any pension check coming in.
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Old 09-10-2020, 07:40 AM   #40
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I have a $500,000 life insurance term policy until age 70.5



$2,000,000 securities and cash



Expenses $2000-$4000/mo



Based on this information would go with single life higher payment. No need to buy more life insurance with these assets. Use the $12k/yr to go to Disneyland with kids (while you are alive).
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