Joint Survivor Annuity Choices

[CathyA]

Now that DH is 65, he will receive a retirement benefit from a place he worked at quite awhile back. We have to choose what type of Joint Survivor Annuity pay-out we want. Unless you're extremely rich, it's really difficult to know which one to choose. If we had a crystal ball, we would know which would be best to choose. But nobody knows how long they have. DH was tempted to get the high paying one (which isn't a joint survivor thing). Of course, if he lives a long time, this would be the best choice! But even if we are both fairly healthy, you just never know.......you could slip on a banana peel tomorrow and die. (something my father always said).

There are several choices.......the 10 year certainty one; the spouse gets 66%; the spouse gets 50%; and one other that I can't remember (he took the papers with him to work). I suppose the biggest thing to consider is how we are financially, going into our "golden years". (Who the hell dreamed up that phrase?). Right now, we're thinking the joint choice where he would get the most, while I would get the least if he should die might be the best. It still isn't the biggest amount he could get without the joint survivor choice, but it's just so hard for me to encourage him to go with the biggest pay-out. It's great if he lives 10-20 years more.......but if should die tomorrow, I would hate to see neither of us get any of what he earned and deserved.

Sorry if I'm a little vague on this stuff. I find it pretty confusing.
It's just a crapshoot, I guess.
Any suggestions?

[iris lilies]

The first and main consideration I think is this: is this annuity is central to your income if it is then you have to take the most conservative option which is least amount of money over the longest time.

but let me get back to this probably next week because DH and I are discussing pretty much the same thing.

[rodeosweetheart]

I second what Iris Lilies said. 10 years is nowhere near your average expected lifespan, so unless you personally (not just maritally) have a solid source of income, go for the one with survivor benefits for as long as you can.

[Gardenarian]

I have my daughter as my beneficiary. I had a choice: 1) Do nothing, she gets nothing. 2) Take a $200 per month cut and she gets $1000 per month for life after my death. 3) Take a $100 per month cut and she gets $500 per month for life after my death.

I went with option 3, feeling that I wanted dd to have something, but also want to bet on me living a good long while.

[SteveinMN]

d. Not enough information to answer at this time.


While in some cases we have not yet had to make the actual decision, our financial plan calls on both of us to draw the maximum benefit from each of our pensions without regard to survivor's benefits. I would not counsel anyone with generic advice -- financial considerations are rarely one-size-fits-all. Consider:

If DH worked at this place quite a while back, he's likely worked elsewhere since -- probably for much more money. What do his other retirement benefits look like? Does he have to start drawing on them now or (as with Social Security or an IRA) can he wait?

What do your retirement benefits look like?

Where does Social Security fit in for both of you? Life insurance? Other savings/assets not specifically earmarked for retirement?

Is it worth taking the maximum from this pension now and delaying the draw -- or taking a larger survivor's benefit -- from another pension/income stream (his or yours)?

How long will you live? No one knows exactly, of course, but there are signs. A friend of mine (my age) has several siblings who are well into their 70s; his mom is 93 and fully active, and his dad passed on just last year at 89. Sure, he could get run over by a truck tomorrow. But if that doesn't happen, he probably has a very long retirement ahead and should plan accordingly. Me? No male on my dad's side lived past 70. On my mom's side, they've lived into their 80s, but that's fairly rare. Sure, I could live to 98. But it's unlikely. I should plan accordingly.

There's no good way we can advise you on a decision, but we can point you in the direction of what you need to think about to make the best decision you can with the information you have now. Good luck. I hope this helped.

[Teacher Terry]

WE both took a hit on our pensions that the other spouse could receive the same amount when one died. WE qualify for very little soc sec because of the windfall provision they will take 2/3 of our SS. This was central to our planning because at some point we will be fully retired & not working at all & our other $ will only last so long. With 2 pensions that have Cola's one person could live on that & be fine.

[rosarugosa]

Cathy: Don't forget that female life expectancy is longer than male.

[Blackdog Lin]

This one I can at least address, if not help with. I had a similar dilemma.

In our case, I would forgo/pay $150/month for DH to have lifetime survivor benefits, but he could only ever get 50% of my pension amount - let's call it $1000/month. That's the monthly amount I was dealing with. And I could live as a single on my pension alone, while his SS is enough less that he would struggle to maintain the current lifestyle. So I looked into life insurance for me, and purchased a large 20-year term life insurance policy that costs $110/month, and that will cover him for (if he withdrew that same $1000/month for living expenses) 12.5 years. It was a no-brainer for our situation. I have protected his income for less monthly expense.

I realize that I have made a bet on a 20-year income benefit vs. a lifetime benefit - but it made sense for our financial situation. You may want to look into and consider life insurance vs. survivor benefits for your situation.

eta: Cathy, you said it all when you said it was all a crapshoot. Yup. All we can do is the best we can do, the best we can figure out.

[gwendolyn]

Blackdog Lin was really smart with doing her math, including probability calculations. (Didn't anyone else have to study that in high school or college?)

Cathy, I don't know your personal financial situation (as opposed to your DHs), but I am constantly amazed that people even ask this question. (And it's almost always traditional couples where the wife has had significantly less income and is younger.) I can't imagine why, when women live on average 14 years longer after their husband dies -- possibly much longer, and with much higher costs of living due to age and living alone or in special care facilities... why any Dear Husband would even think of leaving his wife with no survivor benefits.

I've been wanting to shout this one from the rooftops for over 5 years! I've known too many true stories; husbands taking years -- more than three decades for my uncle -- of full benefits, not saving/reinvesting any of it, and then dies suddenly while wife is left literally destitute, even the last checks being clawed back by the annuity fund once they find out about the death, just as she's trying to figure out how to pay for a funeral...

Assume you will live well past your husband, and if you don't, well then he should just plan on living a very long time after you go so he gets all the value he can out of the annuity! That's a much safer bet than the other way around.

[iris lilies]

Blackdog Lin was really smart with doing her math, including probability calculations. (Didn't anyone else have to study that in high school or college?)



I love being the outlier.

In my household DH has the great numbers (low blood pressure, low heart rate, low cholesterol) and I have the high numbers. That affects how we plan for the future.

I also have a WHOLE LOT MORE income than DH. Craploads.

So the lesson here is this: YMMV from standards stats.

[Blackdog Lin]

Well, gwendolyn gives me more credit than I deserve. Lifetime probability did not enter into my calculating. I have based everything on the fact that either one of us could drop dead tomorrow.

(1) I could live comfortably (if simply) on my pension, especially since I would spend a year clearing this place out, having a big auction, and selling out. The place is worth a nice amount. Already I am struggling with 2 of us (one a disabled DH) taking care of 7 acres, a pond, the tree rows, the house repairs, etc. I KNOW I'm not interested in trying to take care of the place by myself.
(2) DH's social security is enough less that he would probably struggle to pay the bills, AND he would never stir himself enough to get the work done to sell out and move and have the proceeds available to supplement his income. If I go first, I see him eventually dying with our nice house and property sagging down around him with myriad minor repairs left undone.

So for our case, life insurance on me was the way to protect him, and saves us monthly income at the same time. It wouldn't be the right answer for everyone.

[jp1]

We're both in our 40's and neither has a pension so we're not discussing this but let me throw out another option. I have no idea if it's possible or logical, but what about looking into buying a term life policy on DH and taking the smaller, or no, survivor benefit. If the premium on the life insurance is less than the drop in his pension benefit would be if you took the higher payout now that might work.

[Teacher Terry]

This works great when you have no health issues so the rate is cheap. NOt so good if that is not the case.

[CathyA]

Blackdog Lin was really smart with doing her math, including probability calculations. (Didn't anyone else have to study that in high school or college?)

Cathy, I don't know your personal financial situation (as opposed to your DHs), but I am constantly amazed that people even ask this question. (And it's almost always traditional couples where the wife has had significantly less income and is younger.) I can't imagine why, when women live on average 14 years longer after their husband dies -- possibly much longer, and with much higher costs of living due to age and living alone or in special care facilities... why any Dear Husband would even think of leaving his wife with no survivor benefits.

I've been wanting to shout this one from the rooftops for over 5 years! I've known too many true stories; husbands taking years -- more than three decades for my uncle -- of full benefits, not saving/reinvesting any of it, and then dies suddenly while wife is left literally destitute, even the last checks being clawed back by the annuity fund once they find out about the death, just as she's trying to figure out how to pay for a funeral...

Assume you will live well past your husband, and if you don't, well then he should just plan on living a very long time after you go so he gets all the value he can out of the annuity! That's a much safer bet than the other way around.

It's not like there were only 2 choices.........there were 5. I wanted some feedback from people who had been through this.
DH has a big life insurance policy and should he pass before me, he will also have a very good social security amount which I would also get. We also have been putting the maximum allowed into IRAs.
It may have made sense in this instance to let him take the full amount, which would stop when he died. But I couldn't stand thinking that should that happen, any of his pension would just stop. So we chose the survivor 50% option.
Gwendolyn, maybe some of us took different courses than you did.
Thanks to all who helped to answer my question.

[Teacher Terry]

We had 5 choices too when we retired. Glad you made a decision.

[iris lilies]

Now that DH is 65, he will receive a retirement benefit from a place he worked at quite awhile back. We have to choose what type of Joint Survivor Annuity pay-out we want. Unless you're extremely rich, it's really difficult to know which one to choose. If we had a crystal ball, we would know which would be best to choose. But nobody knows how long they have. DH was tempted to get the high paying one (which isn't a joint survivor thing). Of course, if he lives a long time, this would be the best choice! But even if we are both fairly healthy, you just never know.......you could slip on a banana peel tomorrow and die. (something my father always said).

There are several choices.......the 10 year certainty one; the spouse gets 66%; the spouse gets 50%; and one other that I can't remember (he took the papers with him to work). I suppose the biggest thing to consider is how we are financially, going into our "golden years". (Who the hell dreamed up that phrase?). Right now, we're thinking the joint choice where he would get the most, while I would get the least if he should die might be the best. It still isn't the biggest amount he could get without the joint survivor choice, but it's just so hard for me to encourage him to go with the biggest pay-out. It's great if he lives 10-20 years more.......but if should die tomorrow, I would hate to see neither of us get any of what he earned and deserved.

Sorry if I'm a little vague on this stuff. I find it pretty confusing.
It's just a crapshoot, I guess.
Any suggestions?

Getting back to this after a few days.

We are taking the "ten year certain" option since it's only a 3% reduction from full out annuity payment. Probably, though (and this is a very general guess) it will encompass about 30% of our annual income.

[Packy]

Find a need, and then meet it. I'd suggest maybe moving up to Hummolt, and open up a cannery specializing in making pizza sauce in restaurant-size containers. Maybe a vineyard, too. Then, bottle your own label of wine. There is an ever-increasing segment of premium wine consumers in the 50-up female category. So cater to 'em. That'll be your retirement income stream. Thankk Mee.