I'm hoping to get many different angles, and opinions on this issue, and need to make a decision fairly shorty. We are a married couple, 50 & 55 Y.O with me (husband) being the younger. We are debt free, and live a frugal existence. I recently liquidated a custom homebuilding business, and my wife is about to retire from a 30+ year career as a school teacher. The issue is further complicated by the fact that she is seriously disabled, having had a brain injury that left her paralyzed on one side . This took place nearly twenty years ago, and she continued with her career, and raising our kids.
Our current financial situation is as follows:
Vanguard IRA $364K
Prudential IRA $127K
Vanguard ETFs $418K
Home $141K
vehicles $71K
Total $ 1,121K
Now for the confusing part. No matter what happens to me in the future, the wife is going to be well cared for financially. She should end up with a yearly income of $70-80K (adding pension and Social Security), and have no major concerns with health care costs either. OTOH, I need to start covering my own heath care out of pocket. If I would outlive her, any income other than investments is highly dependent on the pension option we select. With that in mind the following pension selection options are on the table
#1 Disability, without survivor benefit. $5232/month
#2 Disability, w/survivor benefit of $3969/mn $4676/mn
#3 Standard without survivor benefit $4525/mn
#4 Standard without survivor AND rolling
a $161,500 cash balance over to an IRA $3737/mn
#5 Standard with survivor benefit of $3969/mn $3669/mn
#6 Standard with $3969 survivor and removing
$161.5k cash balance for IRA roll over $3278/mn
The roll over cash is not available if a disability option is chosen. The cash is only available if selected initially, once you pull the trigger, it's done. The pension is pretty unlikely to enjoy any cost of living adjustments, since the system is underfunded, and small, to insignificant COLAs happen every decade, if that. There are no taxes on pensions or Social security in this state, or locally, but federal taxes apply. Some of my IRA assets were inherited, so I have a forced distribution of $12K or so annually. It is taxed, but not penalized. Other than that there will be no income, or asset withdraws as I have no need, or interest, doing so.
So, what would you do. Take the maximum disability amount and risk the lack of "insurance" that comes with not having a survivor's pension? Give any weight to being able to remove the $161K from the system? See about getting a term life insurance policy for her? I haven't got a clue as to the best option here, and I welcome your input. Thanks.