Author Topic: Pension - How to calculate which survivor's benefit to take?  (Read 2947 times)

Aimza

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Pension - How to calculate which survivor's benefit to take?
« on: September 19, 2016, 11:08:40 AM »
Hi all,

I'm dealing with my dad's retirement paperwork (he will retire in January 2017). We have to decide whether to take


50% joint and survivor pension: $1,136 per month / spouse (upon your death) $568

or

75% joint and survivor pension: $1,064 per month / spouse (upon your death) $798


Any clue how to make a formula to calculate which is the best to take now? My dad is 70 in okay health. My mom is 64 1/2. They are okay financially now with retirement savings (401k and Roth IRA), social security and rental income (they own a two-family house in Queens, NY with about 60k left on mortgage).

They are leaving this decision to me and I'm just not sure how to do the math.

Any help is appreciated.

Thank you!

seattlecyclone

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Re: Pension - How to calculate which survivor's benefit to take?
« Reply #1 on: September 19, 2016, 11:16:41 AM »
Maybe look at worst-case scenarios. Suppose your dad passed away the month after he retired, and your mom lived to age 100. Would the 50% pension (plus any savings and social security) be enough for her to live the life she wants, or would the extra $230/month from the 75% plan prove very useful?

Conversely, if your parents both lived to 100, would the 75% pension be enough, or would they need the extra $72/month from the 50% option?

TheAnonOne

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Re: Pension - How to calculate which survivor's benefit to take?
« Reply #2 on: September 19, 2016, 11:20:44 AM »
Maybe look at worst-case scenarios. Suppose your dad passed away the month after he retired, and your mom lived to age 100. Would the 50% pension (plus any savings and social security) be enough for her to live the life she wants, or would the extra $230/month from the 75% plan prove very useful?

Conversely, if your parents both lived to 100, would the 75% pension be enough, or would they need the extra $72/month from the 50% option?

I have no idea about this, but could the extra 72 bucks a month be invested or used to purchase another annuity that would be as much if not more than the $230/month after a period of 5-10 years?

Giro

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Re: Pension - How to calculate which survivor's benefit to take?
« Reply #3 on: September 19, 2016, 11:40:00 AM »
How much for no survivor benefit at all? 

I would invest the difference and aim for more control.  What if your mom dies first?  wasted money.  How old do people on each side usually live for? 

Dee18

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Re: Pension - How to calculate which survivor's benefit to take?
« Reply #4 on: September 19, 2016, 11:51:08 AM »
I ran the numbers assuming your dad lives 10 years after retiring and your mother lives 20.
With the 1135/568, the total amount received would be 204,480
With the 1064/798, the total amount received would be 223,440--resulting in $18,960 more.

Of course the problem is that you cannot predict who will live longer.  My mother is 93, my father died at 79, so I am probably biased in favor of protecting the potential long term widow.  I would go with the 1064/798. 

Aimza

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Re: Pension - How to calculate which survivor's benefit to take?
« Reply #5 on: September 19, 2016, 12:25:32 PM »
I ran the numbers assuming your dad lives 10 years after retiring and your mother lives 20.
With the 1135/568, the total amount received would be 204,480
With the 1064/798, the total amount received would be 223,440--resulting in $18,960 more.

Of course the problem is that you cannot predict who will live longer.  My mother is 93, my father died at 79, so I am probably biased in favor of protecting the potential long term widow.  I would go with the 1064/798. 

This is very helpful. Thank you.



How much for no survivor benefit at all? 

I would invest the difference and aim for more control.  What if your mom dies first?  wasted money.  How old do people on each side usually live for? 

They definitely want the survivor benefit so that's not an option here. What if dad dies a month after he retires? Then it's a completely wasted pension. My grandparents have lived into their mid-late 80s so far.

Maybe look at worst-case scenarios. Suppose your dad passed away the month after he retired, and your mom lived to age 100. Would the 50% pension (plus any savings and social security) be enough for her to live the life she wants, or would the extra $230/month from the 75% plan prove very useful?

Conversely, if your parents both lived to 100, would the 75% pension be enough, or would they need the extra $72/month from the 50% option?

Good question. I will try to figure this out.


I have no idea about this, but could the extra 72 bucks a month be invested or used to purchase another annuity that would be as much if not more than the $230/month after a period of 5-10 years?

I think it could be used for investments, but I am unsure how much money it could make.


Capsu78

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Re: Pension - How to calculate which survivor's benefit to take?
« Reply #6 on: September 19, 2016, 04:00:40 PM »
Was there a good reason he didn't start it until 70?  My pension doesn't get any better at 65, but if I don't initiate it the payouts are lost... just curious.

 

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