Which Pension Selection To Choose?????

[firemediceric]

I'm getting it through my thick skull that resoundingly you all are politely but strongly encouraging me to choose one of the four annuitant options. Assuming I don't need to squeeze every possible dime from my pension to meet monthly expenses, does one of the four annuitant options strike you as a better value than another?

[finnski1]

Quote:

Originally Posted by firemediceric I'm getting it through my thick skull that resoundingly you all are politely but strongly encouraging me to choose one of the four annuitant options. Assuming I don't need to squeeze every possible dime from my pension to meet monthly expenses, does one of the four annuitant options strike you as a better value than another?

I don't necessarily go by the greatest value but by the greatest benefit to your spouse should you die unexpectedly. Take the 100% joint annuity.
ETA the 100% joint is only a few hundred less than you age 64 benefit if you took the single annuity on your own. This would be no brainer in my situation.

[finnski1]

o

Quote:

Originally Posted by firemediceric I am required to return the attached pension selection form ASAP. I'm seeking direction as to which option makes the most sense for me to choose. From the 8 options I feel the bottom 4 can be eliminated without much consideration. I believe there are probably better ways for me to leave something behind for my chosen beneficiary. As it is, she will be receiving her own modest pension benefit along with Social Security when she reaches the age to take both. I hope I am not being selfish by thinking this way. Yes I think you are. You said she only has a "modest pension" and her own ss. The monthly benefit you would get after age 64 or 67 isn't that much more than the 100% joint and survivor one. What if you die shortly after taking your benefit and your wife lives for another 30 or even 40 years with zero dollars from all your hard work. Let's say for the sake of argument she gets $3000/month on her own record. In the short term you could get ($6334 +3000) =$9334/month then down to $8531/month after age 64. Say you pass away (hopefully not) at age 55. DW only will get approx $3000/month or possibly a little more if half your ss benefit is greater than her own. If you chose the 100% joint she would still get ($3000 + 5363) $8363/month A huge difference that in my situation I would never accept. Of the 4 options at the top, I'm leaning toward option 2, Social Security Option to Age 64. It seems that will put the most money in my pocket month after month. A caveat to keep in mind for that option is that on 8/1/2032 when the benefit gets reduced, the COLA also gets reduced. The 3% COLA starts at year 6 based upon the monthly benefit at year 6 and is applied every year thereafter. On 8/1/2032 when the monthly benefit gets reduced, if I select that option, the actuary goes back to reduce the COLA as if the lower monthly benefit had been in place all along. I welcome your thoughts as to what I should choose and why. This is a choice which will have impact for the rest of my life.

[iloveyoga]

I worked in the defined benefit pension area for many years. I also chose the 100% survivor option and DH did the same with his pension. It was a very common choice to see. Probably the next most common choice was life only annuity where the person was just choosing the biggest number.

[latexman]

I chose the 100% joint and survivor annuity option
too. Why? Wife’s folks live 10+ years longer than my folks. When I pass, wife loses the smallest SS payment, and she bumps up to the next tax bracket. My pension is $84k/year. If she lost that too, she’d have to lower her standard of living a lot. I don’t want that.

[firemediceric]

An extremely strong case has been made as to why I should choose the 100% annuitant option. You’ve certainly changed my mind from my opening post. Thank you.

[SnowballCamper]

Quote:

Originally Posted by firemediceric An extremely strong case has been made as to why I should choose the 100% annuitant option. You’ve certainly changed my mind from my opening post. Thank you.

I think a survivor benefit with a COLA pension is generally very valuable for a traditional lifetime couple. If you've been together for most of your service as an emergency responder...she deserves it, IMHO. If you went shopping, an insurance salesman would love to pitch you some insurance product...but finding one with a COLA lifetime payout is pretty doubtful to me.

FWIW my wife and I have 50% survivor on each other (no higher % was offered)
Good Luck!

[Toast]

We are not yet retired. However, both my husband and I have pensions. We are on the same page that 100% survivor benefit is the best option. It is the option we will select when we retire.

[Katiek]

I don't have a pension and I don't have a spouse, so my post isn't intended to be necessarily about the best financial option But I did help my Mom when my Dad passed, and she was a wreck when he passed. She was a smart woman who worked most of her life and had her own pension, but my Dad handled most of the financial stuff.


She was well covered financially when he passed, but the financial changes were very stressful to her. My Dad had picked the survivor option and I can't imagine the additional worry a significant change in income would have caused at such a stressful time. I honestly can't put a straight dollar value on the peace of mind that brought her.

[Sue J]

I may have missed this if it was already mentioned. For DH's pension we chose the 100% to me if he dies first. This resulted in an 11% reduction.

If I die first he can inform his pension plan that he no longer has a survivor and he will get a "pop up" in his pension amount due to it changing to a single life. I don't know if this is specific just to his pension or if this is a standard thing.

It might be helpful to know if your pension options have this provision.

[copyright1997reloaded]

Quote:

Originally Posted by Sue J I may have missed this if it was already mentioned. For DH's pension we chose the 100% to me if he dies first. This resulted in an 11% reduction. If I die first he can inform his pension plan that he no longer has a survivor and he will get a "pop up" in his pension amount due to it changing to a single life. I don't know if this is specific just to his pension or if this is a standard thing. It might be helpful to know if your pension options have this provision.

It's a pretty usual thing, my mega-corp called it J&S w/restore. It does cost you $ for that option, i.e. the reduction would have been slightly less w/o the restore option. (All of these % etc. depend on the annuitants age and contingent annuitants age. For instance, if you were older then the haircut (11%) would have been reduced.)

[Drake3287]

Being retired fire also, your options are way, way different from what we have here in California. The vast majority of retirees here elect for something similar to the "For the retirees life time plus the 66% or 75% for annuitant". I my case it's 90% of my highest single year and my wife gets approximately 80% of that after I die for the rest of her life. This also includes yearly COLA.

I guess it comes down to how much your wife will make with her pension and SS. What does the average Firefighter in your department do in this case? There must be one popular choice they go with. Does your IAFF Local give any guidance as to what makes the most sense?

Once you make your choice there's no going back. Be careful. I would say that 95% of Firefighters here leave a certain high percentage for their spouse.

[firemediceric]

Quote:

Originally Posted by Drake3287 What does the average Firefighter in your department do in this case? There must be one popular choice they go with. Does your IAFF Local give any guidance as to what makes the most sense? Once you make your choice there's no going back. Be careful. I would say that 95% of Firefighters here leave a certain high percentage for their spouse.

Thank you for weighing in as a peer who has also been in the fire service. The parameters they use for your pension calculation over there on the other coast are a lot more favorable than how they arrive at our number in my department.

Neither the union e-board nor the pension board representative will give any type of real input as they do not want to be held financially liable for giving bad advice. I’ve read case study of where that has happened.

Regarding my peers and what others have done, some have gone for the biggest payout possible with the idea that they would buy life insurance with the money. For some who retired younger than me that was working pretty well to get $1 million life insurance policy, until they started aging to where renewing that policy became cost prohibitive, if not impossible.

Since I received the selection sheet yesterday and started this thread I’ve been inquiring of some insurance people. I have not had anyone show me a product that will do what the annuity guarantees. If someone reading this knows of how I could take less than the $1000 a month the 100% beneficiary benefit will cost me through my pension and provide similar security, please share that avenue with me.

You are 100% correct there is no going back once I submit the signed form. That’s why I have such angina trying to make sure I make the best decision.

[latexman]

There are many, many posts on this same subject on the site. Use Search, read, and learn.

[skyking1]

Plenty of good discussion here and I will toss my thoughts in with the 100% survivor option. It will trim my pension about 16% to do this with my (4 years younger) wife. She does not have a pension.
I am also delaying SS to 70 for the same reasons. It provides stable basis for her should she survive me.
With my pension, it would revert to the 16% higher rate should I survive her.

[firemediceric]

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Originally Posted by skyking1 With my pension, it would revert to the 16% higher rate should I survive her.

Unfortunately, my pension doesn’t have that provision.
I guess I’ll remain in DROP longer than I had anticipated to build a bigger reserve to make up for the $1k less per month. Oh well, I’m glad I asked for opinions before making my selection. I tend to act in haste and then repent in leisure.

[pb4uski]

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Originally Posted by firemediceric Thank you for relaying your firsthand experience and decision making. All valid points. I'm being told by sharper financial minds than myself as well a past retirees of this plan that there are life insurance products and other investments which are better options than the offered Joint Annuitant Benefits. That is going a long way into my ruling out those bottom 4 options.

I would not rule out the joint life option.

I looked into that when I started my pension... taking the single life option and buying a term life insurance ladder to provide a death benefit sufficient to fund a life annuity of a similar fixed benefit for DW when I died... the numbers didn't work.

We liked the security and surety of the joint life pension benefit and the fact that DW would not experience a decline in income when I die.

One problem with the life insurance route is who knows what immediate life annuity pricing will be when I die.

Just going from memory, for us it was likely that one of us will life to our early 90s because of joint mortality so we would get many more years of pension payments than the single life benefit.

How old is your spouse?

[Luvtoride]

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Originally Posted by firemediceric . You are 100% correct there is no going back once I submit the signed form. That’s why I have such angina trying to make sure I make the best decision.

That may not be totally true (no going back I mean).

Funny story. When my wife was retiring from her NYC job, we visited the NYCers pension office in Brooklyn to understand all the options.

The rep told us a story about a NYC sanitation worker who retired with the 100% joint survivor benefit. A couple of years after retiring this sanitation worker learned that his wife was having an affair. He was so upset and wanted to make sure she never got a penny of his pension (I don’t know the legal implications or if they got divorced) that he actually went back to work at his job with NYC. By working a couple more years he was able to reset/ revise the “choice” of his original pension selection. This was all allowed by his Pension plan.

[old medic]

Quote:

Originally Posted by firemediceric You are 100% correct there is no going back once I submit the signed form. That’s why I have such angina trying to make sure I make the best decision.

We also decided to go the 100% survivor's route. She will take the same choice in a few years.

[firemediceric]

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Originally Posted by pb4uski I would not rule out the joint life option. How old is your spouse?

Spouse is 52 y.o.
Previous posters have convinced me to go with the 100% joint life option. Although it reduces my pension benefit by $1000 a month, I am not finding a better cost effective alternative.