I know it’s only mental accounting, but that’s why we don’t count any of the deferred comp until it vests and we are allowed to sell it (like you, we have blackout periods, and it ain’t sold until it’s sold). I have a spreadsheet of what is deferred, but I don’t put it in Quicken, and if it’s not in Quicken, it doesn’t exist.</p>
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I got a pleasant surprise like that a couple of years ago. I asked them, in every way that I could: “if I start to collect at 60, I will receive exactly the same monthly amount as if I wait to 65?” They kept saying yes, so my response was that, yes please, sign me up, and while you’re at it, could I have the phone number of anyone who declined, because I’d like to invite them to play poker at my house.</p>
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In addition to the financial questions (financial need, Social Security, assets, longevity expectations, etc.), this is a question that is often emotional for both spouses. I am sure that your DH is more concerned that you get 100% than he is concerned about the few dollars difference it makes – I would let him enjoy his “providing for you.”</p>
<p>We will sign the annuity papers tomorrow, after many conversations and questions, with 100% survivor benefits for me (the wife).
A question just came to me as I read through the posts. Would it ever make sense to take a much lower survivor benefit, thus receiving higher payments, but keep significant life insurance on the primary person? </p>
<p>@Oregon101, perhaps, but probably not. Pension payments are usually neutral in an actuarial sense, but life insurance has to include a component for administrative costs and profit for an additional party or parties (the agent and the insurance company). KISS </p>
<p>IxnayBob, you’re right about dh. I should appreciate his concern and not fight him on this, since we’ll be just fine with the reduced payout in the meantime. </p>
<p>Wow - your pension will pay full benefits at 60! That’s very nice. Our current plan is to take the pension benefits at 62 but delay social security until 67 or 68 (or whenever we’ll be eligible for the full amount.) </p>
<p>Dh’s employer has a benefit calculator that’s pretty good, so I ran multiple scenarios for age of retirement, % raises in the meantime, age to start benefits, etc. A colleague has been trying to persuade dh to postpone retirement, saying that his last couple of years of base income will make a huge difference. However, given the number of years for which the average pay is calculated combined with no expectation of any big raises, I can’t see much difference. I think she really just doesn’t want him to leave before she does. Coworker & her dh are good friends of ours, but their spending & saving habits are quite different. They have a big mortgage on their residence plus a vacation home and they spend freely. We’re debt free and perhaps more frugal than necessary, but I like knowing that dh could quit tomorrow if his health was in jeopardy or he was just fed up with workplace politics.</p>
<p>Depends on the cost of insurance, the terms, the benefits etc. A friend of mine looked to do exactly what you said. Buying insurance for him was not a better deal. </p>
<p>My guess is IxnayBob is correct. </p>
<p>The other thing I look at is can a pensioner replicate his income stream by taking a lump sum and buying an annuity. (Taxes have to be looked at). My guess is not too often. </p>
<p>Silpat,
My DH retired from his past employer about 6 years ago, and they’ve had a few iteratons since so we arent 100% sure where the pension plan is at this point, though I did track down a contact person for him at one point. I thought he had to make that selection when he retired,but his memory is that it is to be made when he starts to draw it. </p>
<p>we will probably go with a 100% survivor benefit… The reason? Our defined benefit plan does not offer any cost of living increases. It is was it is, until the day you die. I am sure that inflation will eat up much of the value of the pension, especially if one of us lives to 100. That’s 35 years or more of inflation! So we will go with 100% survivor benefit and hope that will help keep the actual value of the amount available to the surviving spouse.</p>
<p>Depending on the pension plan doc, the plan may not permit lower than a 50% Joint & Survivor annuity. If the plan offered a cashout or Single Life Annuity (or any other benefit that is less than a 50% J&S), the spouse would have to sign off on it.</p>
<p>True story: I administered a pension plan where the wife (employee) decided to retire to care for her elderly husband who was in very poor health. Chose to take a single life annuity to get the larger benefit since they believed she’d outlive her husband. I had talked to her about the J&S vs. SLA implications and she got the paperwork explaining this stuff, but her D convinced her to take the SLA. </p>
<p>She died two months after retirement. Her H got no survivor benefits. I cannot tell you how upset I was.</p>
<p>Moral: Protect your spouse, esp. if you have been married many years.</p>
<p>I like taking pension payments as annuities and then using 401(k)/IRA for non-recurring expenses (house repairs, taxes, car, etc.). For the most part, taking a lump sum from a 401(k) and buying an annuity (or taking a lump sum from a pension plan) benefits the broker, not you. </p>
<p>SS planning ranges from simple (single person, average life expectancy, no dependents) to complex (couple with big age gap, different earnings history, health issues, young or special needs dependents, divorce, etc.) The software I referenced above costs $40, and it was well worth it for me to be able to do “what if” analysis of different longevity for my wife and me, different filing, spousal filing, filing early so that the kids would get benefits, etc.</p>
<p>Anyway, you will get the most monthly amount if you delay until 70 (although, depending on longevity, it might not be the maximum lifetime amount). There is probably a way to file for spousal benefits before you file for your own benefits. I wish that I had a nickel for every time I recommended Kotlikoff’s software </p>
<p>“I like taking pension payments as annuities and then using 401(k)/IRA for non-recurring expenses (house repairs, taxes, car, etc.).”
This the plan. We will wait until I am 66 (soon will turn 64 and H is 65) and then H will file for SS and suspend and I will take 1/2 of his until he is 70.
anxiousmom-that makes sense. I had forgotten about inflation.
So much to think about and wish we had really looked at everything a good year ago. We did gather information and met with the pension person and the financial adviser but somehow until H actually retired it did not have any oomph behind it.
As for when the annutity pays out, it is at the end of the month that you sign the paperwork minus 7 days for processing for us. We have nearly a year to sign but no payments and so life would eat up private money and the numbers do not change as the % is set at the beginning of each year.</p>
<p>I changed jobs 4-5 years ago, but was at my former employer long enough to have accumulated a decent pension. I asked for a print out of projected payments at various retirement levels, and found that, like IxnayBob, my pension went up a sizable percentage until I reached 62. Then between 62 and 65 the increase was almost non-existent. I think this is to encourage early retirement, and I’m not surprised.</p>
<p>So I just turned 62, and applied for the pension from my former employer. You apply no more than 60 days before you anticipate getting the benefit. You decide the survivor benefit at the time you fill out the paperwork. Your spouse has to provide a wet signature as evidence they agree with your choice of spousal benefit. Clearly they don’t want you to apply too far in advance then have your circumstances change. </p>
<p>So I’m collecting the pension from my former employer while getting paid by my current employer. I redirected my paycheck into a stock fund, so we’re banking all of it and living off my pension and my H’s salary. </p>
<p>We elected to do the 50% survivor benefit, and will do the same election when my H retires. His annual pension is only a couple thousand less than mine, so we each get our own pension, then would get 50% of the spouse in the event of death. That seemed okay </p>
<p>Another shout out to you, IxnayBob. I read your recommendation for Social Security Solutions, and decided to spring for it. After asking a bunch of questions, it told us the best approach to take, and what each of us would receive under various iterations. Loved it!! Thanks, Bob. Send me your address, and the nickel is on its way. </p>
<p>This is so interesting! Most dilemmas of modern life are addressed on CC, if you hang around long enough! </p>
<p>My employer has a pension plan, not a great one, but it exists, with a 4 % accrual per year. They emphasize the 401K these days. No survivor benefit in the pension, from what I’ve heard, though is moot in my case. Most retirees take it as lump sum, and reinvest for an annuity. I have never quite understood this, as there is always a business that gains with this sort of transaction, though then you can provide for survivors. From what I am reading here, this lump sum is then taxed? So taking the pension itself is a smarter move for the most part? </p>
<p>We worked with our financial planner to determine the %age for DH as a survivor benefit. The FP clearly listed all of our various benefits with both of us retired, with DH dying, and with me dying. The goal was to have DH or me have about the same income if the other died first. For us, that meant 50% as a survivor benefit of my pension for DH.</p>
<p>DH will have his own retirement accounts, and SS but has never had a pension with any company. </p>
<p>And I can’t collect on his SS if he dies first (I worked in CT as a teacher…can’t ever collect on my husbands earnings).</p>
Not necessarily. You can transfer the lump sum directly into an IRA, and actually might have more control over the taxation than getting monthly payments. There unfortunately is not a one-size-fits-all solution to retirement income streams. </p>
<p>I would buy that software, but I think the Social Security Administration will change the rules before I need that information. I still have another 12 years until I can collect SS at the full amount.</p>
<p>My husband talked to his best friend today who worked at the same company years ago and he said he received a small pension. I need to find a website to search for missing pension. Who knew?</p>
<p>survivor benefit. - Where relevant, we will probably default to a decision of 50% unless we come up with better reasoning at the time of decision. </p>
<p>Alas, our pension-like income is pretty limited. We have decent savings and 401K, but I liked the idea of nice pensions (when we had them) to have less guesswork on lifespan.</p>
<p>I ran my own pension and it doesn’t look that much different from 50% to 100% survivor benefit. The difference is less than $100, so that won’t make a big ding to my budget, so I’ll choose the least risk, which is 100%. </p>
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