DW is retiring. Should she make me a beneficiary on her pension?

[doxiemama]

I realize the OP already had made up their mind but for others I still say it is cheap "insurance", People that I know that opted out of it regretted it. For me no brainer as we are not "rich" but still cheap "insurance"!

 

[doxiemama]

We chose 100% survivor benefit on DW's teacher pension. We didn't want to tempt karma. With 0% survivor benefit, we figured she would pass as soon as she retired. With the reduced benefit plus 100% survivor, we figure she'll live to be 100.

We felt like that too!

 

[old medic]

We chose 100% survivor benefit on DW's teacher pension. We didn't want to tempt karma. With 0% survivor benefit, we figured she would pass as soon as she retired. With the reduced benefit plus 100% survivor, we figure she'll live to be 100.

Well I retired 1/22, 5/23...... CRASH... 3 days touch and go on a ventilator and she didn't pull the plug...

 

[Koolau]

Well I retired 1/22, 5/23...... CRASH... 3 days touch and go on a ventilator and she didn't pull the plug...

And we are all SO glad she didn't pull the plug!!

 

[old medic]

And we are all SO glad she didn't pull the plug!!

She had the checks in one hand ,cord in the other.... I guess she still likes me after 42 years...

 

[Out of Steam]

I made the choice of a 50% survivor's pension for my wife despite it costing a 10% reduction in my pension. My wife has more in retirement savings as I do, but no pension.

A couple we know who both have pensions of about the same size chose to decline the survivor benefit, which seems reasonable under their circumstances.

 

[Gumby]

.....

A couple we know who both have pensions of about the same size chose to decline the survivor benefit, which seems reasonable under their circumstances.

Here's the problem with that reasoning. A household of one does not cost half of the amount that a two person household does, it costs more. In fact, when the census normalizes income for household size, it uses the square root of the number of people in the household. Thus, a one person household is 1^-2 or 1.0, a two person household is 2^-2 or 1.414, a three person household is 3^-2 or 1.732, and a four person household is 4^-2 or 2.0. If we take the reciprocal of these, that means the expenses of a one person household are about 71% of the expenses for a two person household. (1.0/1.414 = 0.707). So, if your friends have equal pensions without survivorship rights, then when one dies the income goes down to 50% of prior, but the expenses are still about 71% of prior.

The traditional model of social security (with one non working spouse) implicitly uses this model as well. Typically, the non-working spouse gets 50% of the other spouse's benefit. Then, when the working spouse dies, the spousal benefit stops and the survivor benefit is the amount that the working spouse was receiving. So income is cut to 67% of what it was.

 

[pb4uski]

Just a final follow up here. My wife thought about this for quite a while and announced her decision to me by blasting the old Grass Roots song, "Let's Live for Today". Her way of saying that she's taking the maximum pension with no survivor benefit for me. I'm fine with that decision (it's her money, after all). But now I can't get "SHA LA la la la la Live for Today" out of my head.

In our case, after 44 years of marriage, there is no "his" money (other than an inheritance from my parents) and very little "her" money. Something like that is our money which is why we opted for 100% survivor benefit for my defined benefit pension.

 

[Koolau]

Actually, our choice for my pension was either 50% or 25% survivor benefit. We chose 25%. DW started SS at 62 so her benefit was cut (whether on her own record or as half of my @70 benefit. So, back-of-the-envelope, her income when I pass will be just about 70% of what ours was together. In addition to that she'll receive over $150,000 in life insurance. That doesn't even consider that the "family" retirement stash will all pass to her.

We believe we figured this pretty well. But I won't be able to tell you how well when the time comes.

 

[RetireAge50]

We have a similar decision for my wife's state pension. Originally in my planning I wanted to maximize everything for my wife so was planning to do single life. However, recently some health scares made us realize life is not always as expected. We have decided to do 100% survivor for a 10% reduction. This decision really won't change our spending at all and will just change the amount of inheritance for our kids.

Note: This thread made me take a look again and the pension reverts back to single life if I die so this makes it even better.

 

[stepford]

We have a similar decision for my wife's state pension. Originally in my planning I wanted to maximize everything for my wife so was planning to do single life. However, recently some health scares made us realize life is not always as expected. We have decided to do 100% survivor for a 10% reduction. This decision really won't change our spending at all and will just change the amount of inheritance for our kids.

Note: This thread made me take a look again and the pension reverts back to single life if I die so this makes it even better.

DW have no kids (and no heirs other than each other). Maybe that's partly why we chose the no survivor benefit option.

 

[Out of Steam]

Here's the problem with that reasoning. A household of one does not cost half of the amount that a two person household does, it costs more. In fact, when the census normalizes income for household size, it uses the square root of the number of people in the household. Thus, a one person household is 1^-2 or 1.0, a two person household is 2^-2 or 1.414, a three person household is 3^-2 or 1.732, and a four person household is 4^-2 or 2.0. If we take the reciprocal of these, that means the expenses of a one person household are about 71% of the expenses for a two person household. (1.0/1.414 = 0.707). So, if your friends have equal pensions without survivorship rights, then when one dies the income goes down to 50% of prior, but the expenses are still about 71% of prior.

It's a fair point, especially since most people don't move to smaller quarters after being widowed. It shouldn't hurt this couple as they have not withdrawn money from retirement accounts in 15 years of retirement.

 

[pb4uski]

DW have no kids (and no heirs other than each other). Maybe that's partly why we chose the no survivor benefit option.

That makes no sense since kids/heirs would not receive susvivor benefits in any event. Your DW will hopefully or presumably have a surviving spouse, right?

Sounds like you are grasping at straws to rationalize what you decided, but its your money.

 

[Just_Steve]

That makes no sense since kids/heirs would not receive susvivor benefits in any event. Your DW will hopefully or presumably have a surviving spouse, right?

Sounds like you are grasping at straws to rationalize what you decided, but its your money.

Can you explain that statement? My wife and I have made our son the survivor beneficiary to her state pension.

 

[stepford]

Sounds like you are grasping at straws to rationalize what you decided, but its your money.

Perhaps I am, but ultimately it doesn't matter. As I said at the start of this thread, I don't need her money to live comfortably should I survive my wife. Without her I have savings of 40-50x my projected individual annual spending (+SS +my own pension).

In the worst case scenario in which DW dies immediately after starting retirement, all that being her beneficiary would buy me is the ability to leave a larger inheritance for my non-existent heirs. In the best case scenario where she gets to stick around for a while she gets to enjoy a somewhat fatter lifestyle by not naming me as a beneficiary. Is that grasping at straws or a legitimate justification? Who knows, but it works for us.