Pension question - 65% J&S vs Single plus term insurance

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Ready3Retire
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Joined: Tue Sep 16, 2014 11:15 am
Location: Midwest

Pension question - 65% J&S vs Single plus term insurance

Post by Ready3Retire » Sun Sep 16, 2018 9:12 am

My MegaCorp pension offers several options ranging from single life benefit (spouse gets no pension after I die) to 100% (spouse continues to get same amount as when I was alive). I have been planning to take the 65% Joint & Survivor benefit in a year or so when I am 59 or 60. My spouse is 4 yrs younger than me.

I'm wondering if other married people, who are fortunate enough to have a pension, have elected the single life benefit and purchased term life insurance to benefit surviving spouse - essentially self insuring. I did a quick comparison between Single and 65% and it is $280 per month difference.

I visited a term life insurance website and plugged in my age health info, and amount but it required my name, email, etc before providing a quote. I don't want to be hounded by some insurance company so bailed out.

Does anyone use the approach of single life benefit plus term insurance? I'm clueless on what term life insurance costs since I'm covered by my company while working. Can a 60 year old male in good health get a $800K term policy for less than $280/month?

lilyn20
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Joined: Tue Mar 27, 2018 5:09 pm

Re: Pension question - 65% J&S vs Single plus term insurance

Post by lilyn20 » Sun Sep 16, 2018 9:15 am

If you go to www.term4sale.com, you can run scenarios without giving your info.

PartIrish
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Re: Pension question - 65% J&S vs Single plus term insurance

Post by PartIrish » Sun Sep 16, 2018 2:38 pm

Similar circumstances, but my spouse is 5 years older, and I was deciding between 100% or 67% pension survivor options. Did a spreadsheet and a 20-year term insurance policy (taking DH to age 82), plus the 67% survivor option for the pension came out ahead of the 100% J&S option by several hundred dollars per year. I liked the added benefit that if I died before the 20 years was up, the insurance policy payout would be tax free to spouse, whereas my pension is taxed. If we both outlive the insurance policy, that's another way to come out ahead. YMMV

delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: Pension question - 65% J&S vs Single plus term insurance

Post by delamer » Sun Sep 16, 2018 8:59 pm

PartIrish wrote:
Sun Sep 16, 2018 2:38 pm
Similar circumstances, but my spouse is 5 years older, and I was deciding between 100% or 67% pension survivor options. Did a spreadsheet and a 20-year term insurance policy (taking DH to age 82), plus the 67% survivor option for the pension came out ahead of the 100% J&S option by several hundred dollars per year. I liked the added benefit that if I died before the 20 years was up, the insurance policy payout would be tax free to spouse, whereas my pension is taxed. If we both outlive the insurance policy, that's another way to come out ahead. YMMV
The real question is if you die when your husband is 83, will he have enough to live on with the 67% survivor benefit and no insurance proceeds? Presumably some Social Security benefits will be lost then too.

delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: Pension question - 65% J&S vs Single plus term insurance

Post by delamer » Sun Sep 16, 2018 9:14 pm

Even if you can obtain an affordable life insurance policy on yourself that will cover you until your wife is 95, it seems to me that you are compromising her financial security by eliminating the survivor benefit.

For one thing, If you die first she will also lose some portion of your family Social Security benefits. She will only continue to receive the larger of your individual benefits. So if you were getting $2,000/month and she is getting $1,000/month, her benefit will be reduced to $2,000 going forward.

Plus she will become responsible for investing a large sum of money at a time when she is both grieving and aged. Is that something she is going to want to deal with?

And that is assuming you can get an affordable term life policy that goes that long.

Even in you could save $150/month by going the single life/term insurance route (which I doubt), is it worth it?

PartIrish
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Joined: Mon Feb 23, 2015 10:39 pm

Re: Pension question - 65% J&S vs Single plus term insurance

Post by PartIrish » Sun Sep 16, 2018 10:20 pm

delamer wrote:
Sun Sep 16, 2018 8:59 pm
PartIrish wrote:
Sun Sep 16, 2018 2:38 pm
Similar circumstances, but my spouse is 5 years older, and I was deciding between 100% or 67% pension survivor options. Did a spreadsheet and a 20-year term insurance policy (taking DH to age 82), plus the 67% survivor option for the pension came out ahead of the 100% J&S option by several hundred dollars per year. I liked the added benefit that if I died before the 20 years was up, the insurance policy payout would be tax free to spouse, whereas my pension is taxed. If we both outlive the insurance policy, that's another way to come out ahead. YMMV
The real question is if you die when your husband is 83, will he have enough to live on with the 67% survivor benefit and no insurance proceeds? Presumably some Social Security benefits will be lost then too.
Due to long-standing health problems, DH is highly unlikely to make it to 83 and outlive me. So for us that box in the decision matrix was very low risk. He has the higher SS, and we have additional streams of income, as well as a strong nest egg. So the 1/3 of pension lost will not be an issue.

kaudrey
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Re: Pension question - 65% J&S vs Single plus term insurance

Post by kaudrey » Mon Sep 17, 2018 1:46 pm

My DH is 61 and 12 years older than me. We originally decided to go with a 50/50 J&S on his pension, which he'll get when he's 65, and we bought a $500K term policy on him. I forget the cost, but it wasn't very much in the scheme of things. He is very healthy and active. However, although we still have the term policy, we have changed our minds and decided to go with 100% J&S when the time comes, due to the fact that I will only be 53 when he starts his pension. Not sure if we'll keep paying on the term policy at that time or not; we haven't decided.

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