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I looked at all those issues and took the pension reduction for 100 % survivors benefit s for my wife ...it was about a 10% reduction
With out taking the survivors benefits our health insurance ended at my death
I had a slight concern about the insurance company going out of business
The premiums were quite a bit more than the reduction so that made it a no brainier
How long will the life insurance policy be for? Say you retire at 62 and your spouse is 60. You take the higher pension and purchase a 20 year term policy. So at 82 if you and your spouse are still alive can you buy another policy? If you can not and die at 83 what happens to your 81 year old spouse?
That is another part of the discussion. How long do you expect your spouse to live and what is their current health? Folks I knew didn't necessarily expect their spouse to out live them. Is the purpose of not doing survivor and doing life insurance to help you or your spouse? If they pass before you, you still have your full pension and can cancel the insurance and the payments. Think about it.
How long will the life insurance policy be for? Say you retire at 62 and your spouse is 60. You take the higher pension and purchase a 20 year term policy. So at 82 if you and your spouse are still alive can you buy another policy? If you can not and die at 83 what happens to your 81 year old spouse?
What we are looking at is a combination of policies, 20, 25 years, and universal life to age 95. If the rates are what is expected, it would save money each year. Just did a quick calculation and it looks like a 16% differential on mine between taking the survivor benefits or not. Someone mentioned the cost of premiums going up and that was also a concern of mine but I was told they would be set for the duration of the policy. I still need to check regarding healthcare however as that is something I had not thought about.
I chose the insurance option. I bought a permanent lifetime policy.
The difference was significant. The insurance premium was MUCH less then the survivor option.
Yup. The insurance option also gives you the eventual nest egg for the surviving spouse IF they know how to manage it. How much and for how long will it last at what drawdown and roi rate? Lots to consider and what ever works for each person after reflection is probably the best move as you know. I liked the crusise control aspect of taking the survivor option along with the 62/70 SS.
Yup. The insurance option also gives you the eventual nest egg for the surviving spouse IF they know how to manage it. How much and for how long will it last at what drawdown and roi rate? Lots to consider and what ever works for each person after reflection is probably the best move as you know. I liked the crusise control aspect of taking the survivor option along with the 62/70 SS.
Okay, for the naive here, explain what you mean by 62/70 SS. I know we are looking at holding out as long as we can before taking SS and I have a very small grasp on it from one workshop but also need to get up to speed on that too.
What we are looking at is a combination of policies, 20, 25 years, and universal life to age 95. If the rates are what is expected, it would save money each year. Just did a quick calculation and it looks like a 16% differential on mine between taking the survivor benefits or not. Someone mentioned the cost of premiums going up and that was also a concern of mine but I was told they would be set for the duration of the policy. I still need to check regarding healthcare however as that is something I had not thought about.
I would be extremely surprised if your financial advisor suggests that you purchase life insurance in lieu of a survivor annuity. Unless, of course, he sells life insurance.
A couple of things to keep in mind when making the decision: For one, the amount that you are "paying" for the survivor annuity is off-the-top before taxes, so you wouldn't have an equivalent amount of money to pay for life insurance. IOW, if your pension is reduced $8,000 to provide a survivor annuity, your W-2P will just show the reduced amount. However, if you decide against the annuity and want to purchase life insurance, that extra $8,000 will be on your W-2P and you'll pay income taxes on it. Consequently, you may only actually have $6,000 net in which to pay for the life insurance; not the full $8,000.
Secondly, if your pension is indexed for inflation, the survivor annuity is as well and needs to be factored into the discussion. Therefore, over time, the difference in value between the survivor annuity and the life insurance payout becomes more pronounced. IOW, if for example you purchase a life insurance policy today for $500,000 thinking that would be plenty of money, at an inflation rate of only 4%, that policy will only be worth 1/2 as much in 18 years. But the "face value" of the survivor annuity will have doubled during that time, thus keeping pace with inflation.
Consequently, you may only actually have $6,000 net in which to pay for the life insurance; not the full $8,000.
Secondly, if your pension is indexed for inflation, the survivor annuity is as well and needs to be factored into the discussion. ..... "face value" of the survivor annuity will have doubled during that time, thus keeping pace with inflation.
Leave it to MM to add grist to the mill. Just me, myself and I, so survivor benefits aren't a consideration. It is, however, thought-provoking and informative reading. Thanks to all on this thread for keeping my brain cells alive.
Leave it to MM to add grist to the mill. Just me, myself and I, so survivor benefits aren't a consideration. It is, however, thought-provoking and informative reading. Thanks to all on this thread for keeping my brain cells alive.
Same here. Glad I posted the question. Gives me something to think about and to share with DH who is not into CD at all other than what he hears from me.
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Just me, myself and I, so survivor benefits aren't a consideration. It is, however, thought-provoking and informative reading. Thanks to all on this thread for keeping my brain cells alive.
