My wife and I were starting to look at paperwork for her retirement from full time teaching.
One of the options we need to decide is survivor rate.
We looked at survivor rate in that there are 4 options.
Here is a simplified breakdown.
- 0% survivor rate would mean she would get X amount a year in pension. For example if she would get $43k a year pension and I would get nothing if she would die and no healthcare coverage which is the major factor.
- 50% survivor rate would be $41k a year in pension still get healthcare coverage included but if she were to die I would only get $20.5k a year
- 75% survivor rate would be $39.5k a year in pension, healthcare coverage included but if she were to die I would only get $29,625 a year.
- 100% survivor rate would be $38.5k a year in pension, healthcare coverage included but if she were to die I would get $38.5k a year.
If I were to die all these decisions would be off and she would get 100% of her pension or $43k a year.
Basically the difference is about $2,000 to $1,500 to $1,000 a year difference. So if I never worked and NEEDED my wife’s full pension I would need the 100%.
If I was a worker that did not save enough and had my own 401k saving amount maybe the 75%. Seeing that I have a well-funded 401k I am leaning to taking the 50% survivor rate because the healthcare coverage would be a major decision maker of possibly retiring early.
I really don’t need my wife’s full pension as I have saved quiet well in all my tax savings account but I figure the extra $2,500 or $1,500 from her pension would be nice but I would like something if she were to die and $2k a year is worth having 50% something of her pension and her health coverage.
Someone once also suggested if we don’t feel comfortable with the 50% pay out to get an insurance policy so that if she were to die it would offset the cost of taking the better payout of pension money. An example would be a $100k insurance policy at around $60 a month for 10 years. If she were to die suddenly then I have 5 years to supplement the 50% survivor pay out where I am only getting half of her pension.
I am passing this by you and your readers to see if this is sound thinking or I am I missing something.
What’s your advice for him?