Survivor Annuity

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Topic Author
Cash
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Joined: Wed Mar 10, 2010 10:52 am

Survivor Annuity

Post by Cash » Thu Aug 15, 2019 9:14 pm

My new job offers a survivor annuity, but I have to opt in within 6 months of starting or be forever foreclosed. For 2.2% of my salary, it offers my spouse an annuity equal to 25% of my salary and my child (under 22) an annuity equal to 10% of my salary if I die. They would also be able to continue my health insurance. According to the literature, all payments into the system will be returned as either annuities or paid out to my beneficiaries as a lump sum.

However, my spouse works, makes more than I do, and has access to her own employer-provided health insurance. We also have term life insurance policies. We are both in our mid-30s.

In light of that, does opting into the survivor annuity program make sense for me?

123
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Re: Survivor Annuity

Post by 123 » Thu Aug 15, 2019 9:37 pm

None of us knows with certainty who we will be married to, if anyone, at the time we pass. Life sometimes throws a lot of curve balls at you that you cannot anticipate. Not a clear answer I know.
The closest helping hand is at the end of your own arm.

sawdust60
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Re: Survivor Annuity

Post by sawdust60 » Fri Aug 16, 2019 1:16 am

Perhaps this is comparable to term life insurance - - -

For an annual premium of $400
You might get a term life policy of 500,000

Annuitized using 4% guess: 20,000
Divide by 25% for equivalent salary: 80,000
Cost at 2.2%: 1,760

Is the survivor annuity plan anything more than expensive term life insurance?
Is there a cash value when you leave the company?
What is the value of continuing health insurance?

Topic Author
Cash
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Re: Survivor Annuity

Post by Cash » Fri Aug 16, 2019 3:40 pm

No cash value if I leave. It just gets paid out upon my death as an annuity to my spouse or my child if under age 22, or a lump sum to my child if over age 22.

Health insurance is of little value as long as my spouse continues to work.

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Stinky
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Re: Survivor Annuity

Post by Stinky » Sat Aug 17, 2019 11:54 am

Cash wrote:
Thu Aug 15, 2019 9:14 pm
My new job offers a survivor annuity, but I have to opt in within 6 months of starting or be forever foreclosed. For 2.2% of my salary, it offers my spouse an annuity equal to 25% of my salary and my child (under 22) an annuity equal to 10% of my salary if I die. They would also be able to continue my health insurance. According to the literature, all payments into the system will be returned as either annuities or paid out to my beneficiaries as a lump sum.

However, my spouse works, makes more than I do, and has access to her own employer-provided health insurance. We also have term life insurance policies. We are both in our mid-30s.

In light of that, does opting into the survivor annuity program make sense for me?
This is the kind of approach you would take. There isn't a generalized answer, but here's a sample calculation. YMMV.

Let's say that you and DW are both 40 years old. Your salary is $100,000 per year, implying that your DW's annuity would be $25,000 per year and your premium is $2,200 per year.

Step 1 - To purchase a monthly benefit of $2,008 for a female age 40, continuing for the rest of her life, costs about $540,000 per immediateannuities.com.

Step 2 - To purchase a 10-year term life policy for $550,000 for a male age 40, in the "preferred" rate class, is about $300 per year.

So, in this particular case, you could pay $300 per year and get enough life insurance to buy an annuity that will pay your wife $2,008 per month for the rest of your life, or you could pay your employer $2,200. I'd choose the $300.

There are a number of other benefits offered by your job (child, health insurance, etc.) but the cost difference is large enough that I'd decline the employer coverage.

OP, let me know if this answers your question.
It's a GREAT day to be alive - Travis Tritt

Topic Author
Cash
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Joined: Wed Mar 10, 2010 10:52 am

Re: Survivor Annuity

Post by Cash » Sat Aug 17, 2019 11:57 am

Stinky wrote:
Sat Aug 17, 2019 11:54 am
Cash wrote:
Thu Aug 15, 2019 9:14 pm
My new job offers a survivor annuity, but I have to opt in within 6 months of starting or be forever foreclosed. For 2.2% of my salary, it offers my spouse an annuity equal to 25% of my salary and my child (under 22) an annuity equal to 10% of my salary if I die. They would also be able to continue my health insurance. According to the literature, all payments into the system will be returned as either annuities or paid out to my beneficiaries as a lump sum.

However, my spouse works, makes more than I do, and has access to her own employer-provided health insurance. We also have term life insurance policies. We are both in our mid-30s.

In light of that, does opting into the survivor annuity program make sense for me?
This is the kind of approach you would take. There isn't a generalized answer, but here's a sample calculation. YMMV.

Let's say that you and DW are both 40 years old. Your salary is $100,000 per year, implying that your DW's annuity would be $25,000 per year and your premium is $2,200 per year.

Step 1 - To purchase a monthly benefit of $2,008 for a female age 40, continuing for the rest of her life, costs about $540,000 per immediateannuities.com.

Step 2 - To purchase a 10-year term life policy for $550,000 for a male age 40, in the "preferred" rate class, is about $300 per year.

So, in this particular case, you could pay $300 per year and get enough life insurance to buy an annuity that will pay your wife $2,008 per month for the rest of your life, or you could pay your employer $2,200. I'd choose the $300.

There are a number of other benefits offered by your job (child, health insurance, etc.) but the cost difference is large enough that I'd decline the employer coverage.

OP, let me know if this answers your question.
This is a very helpful analysis. Thanks!

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Stinky
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Re: Survivor Annuity

Post by Stinky » Sat Aug 17, 2019 12:02 pm

Cash wrote:
Sat Aug 17, 2019 11:57 am
Stinky wrote:
Sat Aug 17, 2019 11:54 am
Cash wrote:
Thu Aug 15, 2019 9:14 pm
My new job offers a survivor annuity, but I have to opt in within 6 months of starting or be forever foreclosed. For 2.2% of my salary, it offers my spouse an annuity equal to 25% of my salary and my child (under 22) an annuity equal to 10% of my salary if I die. They would also be able to continue my health insurance. According to the literature, all payments into the system will be returned as either annuities or paid out to my beneficiaries as a lump sum.

However, my spouse works, makes more than I do, and has access to her own employer-provided health insurance. We also have term life insurance policies. We are both in our mid-30s.

In light of that, does opting into the survivor annuity program make sense for me?
This is the kind of approach you would take. There isn't a generalized answer, but here's a sample calculation. YMMV.

Let's say that you and DW are both 40 years old. Your salary is $100,000 per year, implying that your DW's annuity would be $25,000 per year and your premium is $2,200 per year.

Step 1 - To purchase a monthly benefit of $2,008 for a female age 40, continuing for the rest of her life, costs about $540,000 per immediateannuities.com.

Step 2 - To purchase a 10-year term life policy for $550,000 for a male age 40, in the "preferred" rate class, is about $300 per year.

So, in this particular case, you could pay $300 per year and get enough life insurance to buy an annuity that will pay your wife $2,008 per month for the rest of your life, or you could pay your employer $2,200. I'd choose the $300.

There are a number of other benefits offered by your job (child, health insurance, etc.) but the cost difference is large enough that I'd decline the employer coverage.

OP, let me know if this answers your question.
This is a very helpful analysis. Thanks!
Of course, the results will vary based on your age, spouse's age, etc. I chose age 40 because that's the youngest age to purchase an annuity on immediateannuities.com.

Good luck to you.
It's a GREAT day to be alive - Travis Tritt

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