Over the 35 years I have worked I have contributed a significant amount to the pension. I believe I have contributed about 180,000 and my employer was to contribute about another $120,000.
The problem is the employer skipped about 80% of that $120,000
As I said earlier that investment averaged 8.9% of the 35 years I have contributed.
I just checked- I contributed slightly less than $150,000 which means the State contribution should have been around $100,000.
One of the pensions is significantly larger than the other 2, so we will make that one 100%, and make the others 50%.
This may not apply to all pensions, but in my case since I chose 50% on one of the pensions, DH will get 50% of our current level if I check out early. If he checks out, the payment goes up to what it would have been if I had chosen the single life option. It wonât pay retroactively for the months we got the smaller amount, but for the rest of my life it will be at the higher value.
Pensions are devilishly complicated, read up on your options.
I read somewhere, on the average, people need care only for two months at the end of their life. We chose to opt out and self-insure.
Yes, we needed the money for paying off our mortgage and college expenses. Now, we are using our money to travel and enjoy life while we have the health and time. We really prefer to be able to hire the help WE WANT when we want it, so we can remain in our home or wherever we want to live instead of having to be bound by the LTC contract.
If strokes, paralysis, early dementia and other complications run in your life, it may be wise to see what great LTC coverage you can get. For most others, the insurers are raking in the premiums and tend to pay out far less than the premiums they take in. The âolderâ policies were said to be better for consumers; the newer ones, not so much. $100/day or so wonât make a drop in my LTC bucket, IF I even jumped through all the hoops and qualified at a reasonably-priced premium that doesnât escalate dramatically and the company is still in business and paying out when I qualify in the far distant future.
I should mention that if I was to retire today my pension would be $55,000 with 100% survivor benefit. Over the next 7 few years it will increase but I will have contributed an additional $60k over that period.
âThe pension survivorâs benefit is an area where I really had fun. A spreadsheet with possibilities involving 3 different pensions and 2 SS payments, and how much either of us will have if the other checks out early, given single life, 100%, 75%, or 50% payouts on each pension, and various retirement dates and pension commencement dates. At the time, we only had to make a final decision on one pension, but it was a fun puzzle. Maybe I should start doing something like this for payâ
Fun? This is fun? You should definitely look into doing this for pay if it is fun for you, for most of us, purely a headache!
So I finally found the data on our survivor benefits. In our case, me and my husband are very close to the same age, and should each have exactly the same pension, which I donât know if that complicates things or makes it easier.
A 50% survivor benefit reduces the pension payout by 9.2%
A 75% survivor benefit reduces it by 13.2%
A 100% survivor benefit reduces it by 16.8%
Itâs a tough call, if everyone is healthy and feeling good at retirement. HImomâs situation sounds like they took the obvious, best solution, with her husbandâs age and her families longevity.
âRisk is inherent in any decision. But if you have minimized uncertainty, then you can better weigh the risk from alternative decisionsâ
That advice by AttorneyMother sounds very logical. The trick is, I donât think either of us would need the otherâs pension to live on, but we donât want to do something financially stupid.
@tom1944, if you donât mind me asking, how many more years before retirement? Looking at your projected pension numbers, from $68k down to $55k if you should retire now, thatâs quite a bit of difference.
As for LTC insurance, I have read up on it, so many variables and structures as far as policy and payout, I am so confused. I think we may end up self insure, hopefully our pension dollars will at least cover a good portion of the necessary expenses should situation arises.
We also decided not to get LTC. There were too many restrictions and I do want to choose who and when for me or H.
I wonder about how many people even use the LTC when they have it. For many people, if they donât understand it now, they certainly arenât going to understand it in 20 years when they start losing their mental acuity? Unless you have someone really sharp to watch over you, I can see it getting lost in a minute. And if there are so many caveats and restrictions, whatâs the point? Seems easier to save your money, unless you can get one of those high payout, use anywhere LTC policies. If they even exist anymore.
@busdriver11, I guess you have to weigh the current reduction in pension vs. the reassurance that the survivor will have higher payouts for his or her later years. Figure out how much the varying amounts of the pension areâwith 0% survivorship and all the other %s. Also, calculate the SS that each of you will get if you each wait until you turn 70. Also, you have to figure out how much you will need to live on now and in the future, as best you can. Also calculate other sources of income (and/or assets), such as your retirement accounts that you will have to get RMDs from starting at age 70, rentals, etc. Adding the projected income vs. the projected expenses will help you figure out whether there will be a shortfall if you donât leave the survivor any survivor benefit.
Does this make sense? Sorry I garbled how I stated it.
It makes perfect sense. But itâs a lot to figure out!!
Now that I think about it, there is practically no reason for my husband to get the survivor benefit. If he died, I would not stay in this house, as itâs too big for me and I couldnât maintain it. I would drastically downsize, and my costs would go down a great deal. The reality is, I think I could easily live on my pension alone. But the information you gave is a lot to consider. If only I enjoyed figuring this information out, like MomofJandL.
In fact, when the time comes, I might just ask you brainiacs to help me run the numbers!
@AttorneyMother, we currently live in state with estate tax. We are flirting with moving part-time to another state, which has no estate tax, to avoid the worst of winter. (We actually visited last week and found a studio for for ShawWife to sublet). If we move part-time and if we start spending more than half our time in the other state, we would, with some work, legally change our primary residence, I guess. I gather they make that hard but it is doable.
Our backup plan has always been to move to Canada to have health care (and I think LT care) somewhat covered.
Once you settle on your new state, you should revisit your estate plan locally, taking into account the laws of that state and maximize indicia of domicile there.
If you end up splitting your time, youâll have to be careful that the state with estate tax doesnât still have a competing claim on your estate.
Hereâs an older White & Case article on the topic of establishing domicile in FL, a popular estate-planned destination:
Edited: one of the very first cases I worked on (very peripherally, by doing research) was the Howard Hughes estate litigation case. I recall that CA was trying to tax the estate and TX was trying to keep administration in TX. I have no idea what happened, but it was very thrilling for me, as a summer associate, to be working on something that carried a famous name.
Hopeful 6 years so I go from 35/55 to 41/55 and my average salary increases by about $7-10,000
busdrivers pensions are great the longer you live. 401k plans are better if you want money to leave in your estate.
You could always have one pension leave 100% to the survivor and the other pension be taken as a lump sum and not dip into the principal.
Unfortunately, no lump sum option, tom1944. We do have 401ks, which make me feel better because the company canât make that disappear. But yes, pensions are great, though I donât totally trust they will always be there. Too many companies have managed to ditch them.
You donât buy insurance for the average case.
My FIL had Alzheimers and spent almost 2 years in a facility before he passed away. He had an LTC policy which helped my MIL a lot, but I donât know the details.
Both of my motherâs parents spent several years in a nursing home when they were in their 90âs. I donât think LTC existed back then, but I doubt they could have afforded it anyway. It wiped out everything they had, not that that was very much anyway.
Neither of my fatherâs parents spent any time in a nursing home.
Average nursing home costs are $75-85K/year. Iâm sure in high-cost areas they are a lot higher. We will hopefully be able to cover this, should we need it, out of income and assets. If it was needed for year and years, it might be problematic. We are fortunate I think.
Somewhere else on CC, Iâve posted some details about my ILsâ final two years. They both had LTC policies they purchased when they were in their late 50s and these were the âgood policies.â MIL (at age 76) needed assisted living, then Level 2 care, then nursing care because of a degenerative illness. Monthly costs were approx $9000/month (IIRC). Her policy paid approx $2600/month. FIL had the same general policy and never used a dayâs benefit.
I think anyone trying to work out LTC expenses should start by visiting some facilities, seeing their features and pricing them out. When it came time to help them find an assisted living facility because in-home care was no longer feasible, need, location and services were the driving factors. There are different types and levels of care and facilities have varying amenities. Some had in-house P/T, a physician in residence part-time, occupational therapy. Staffing level was important. The food selections were important.
After that cheery note, Iâll add this link that I found among an older email. At one time I had to deal with an actuary and I remembered that there was a website. There is a life expectancy calculator in the form of an Excel sheet embedded in the right hand column on this page, but Iâm not expert enough to use it. Perhaps it will be useful for someone:
I like the concept of green houses, which seem more like âgroup homesâ than huge institutional nursing homes.
Iâm pretty sure that Hâs pension, my survivor benefit and SS, plus rentals, retirement accounts and investments should provide more assets than we will likely need and allow us to leave assets.
Iâm really not a fan of LTC. I believe so many pay in much, much more then they ever get in benefits. Iâm sure they can help some folks and families.
To me the âcostâ of the survivor benefit pension is whatever the reduced amount your pension will pay out. It is really buying a contingent annuity for your survivor. Much depends on how much you value more pension NOW vs paying survivor in the future.
Our home is 3 bedrooms and 2 baths. Its all on one level. Iâm not sure what I would do if H dies before me. I could probably stay here and just hire handy repairmen. Will have to see down the road. I like the house much more than apartment living, but who knows? Iâd like to have the income and assets to do whichever I prefer without it being a financial hardship for me.
Himom, I am with you on LTC. If you can swing it, donât bother with insurance. In the premium, you are paying for the expected cost, guarantee that will be covered and the companyâs profit. In theory, you could invest the premium yourself and cover the cost. Much like what people say about social security, Only if the gov let me invest FICAâŠ