Leave my beneficiary 100/75/50/25 or 0% of my pension?

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Mariobro
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Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Mariobro » Thu Jan 16, 2020 1:11 am

I am retiring this week wth 33 years of service. My pension is aprox 78k and I am 58. My wife is 48 and retiring in 7 years will have apension of aprx 60k.
We live in NYC, have 2 children 10 and 15 years old and no debt. We have a healthy tax deferred annunity that we must make withdrawls on at age 70 and enough for the Kids colleges

My question, I have to choose a beneficiary option and this is how it breaks down:
If I take the full 78, my wife gets nothing when I pass.
If I take 68k my wife get 68k annually once I pass. (100%)
If I take 73k my wife get 36.5k annually once i pass (50%)
I dont have the figure for 75% but I assume I would get aprx 70k and my wife would collect 53 k a year.

Some groundrules:
You can not change your benficiary, even if you get divorced or seperated
If you die before your beneficiary the figure stays the same. (it whould be a loss)

A lot of this is acutary work and can be a bit of a gamble. With a 10 year difference in age I do not think I would take no beneficiary but I am wrestling with the 50/75 or 100% option. Do I take 70 or 73 now, when we still have a lot of bills and expenses with the kids and leave a lil less for my wife once I pass. She will have her 60k pension, soc security and tax deferred annunity withdrawals. What will 100k be worth in 2050?

A general ball park scenario is that I give her 100% and live for 30 years, losing aprx 300k, Once I pass she collects 68k annually making it a good idea if she survives me by at least 5 years. Of course I can go earlier and she whould have windfall but my dad is 86 and healthy, so I am hopeful that i will last as long. On the other hand, I also dont want to shortchange us now in our relatively younger years will taking home 78 over 68 help us now?

Sorry for the long winding post but I need to decide in the next few days and once I sign that paper it is irrevocvable

ScubaHogg
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by ScubaHogg » Thu Jan 16, 2020 7:12 am

Bump because I interested in responses

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Stinky
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Stinky » Thu Jan 16, 2020 7:17 am

Mariobro wrote:
Thu Jan 16, 2020 1:11 am
I am retiring this week wth 33 years of service. My pension is aprox 78k and I am 58. My wife is 48 and retiring in 7 years will have apension of aprx 60k.
We live in NYC, have 2 children 10 and 15 years old and no debt. We have a healthy tax deferred annunity that we must make withdrawls on at age 70 and enough for the Kids colleges

My question, I have to choose a beneficiary option and this is how it breaks down:
If I take the full 78, my wife gets nothing when I pass.
If I take 68k my wife get 68k annually once I pass. (100%)
If I take 73k my wife get 36.5k annually once i pass (50%)
I dont have the figure for 75% but I assume I would get aprx 70k and my wife would collect 53 k a year.

Some groundrules:
You can not change your benficiary, even if you get divorced or seperated
If you die before your beneficiary the figure stays the same. (it whould be a loss)

A lot of this is acutary work and can be a bit of a gamble. With a 10 year difference in age I do not think I would take no beneficiary but I am wrestling with the 50/75 or 100% option. Do I take 70 or 73 now, when we still have a lot of bills and expenses with the kids and leave a lil less for my wife once I pass. She will have her 60k pension, soc security and tax deferred annunity withdrawals. What will 100k be worth in 2050?

A general ball park scenario is that I give her 100% and live for 30 years, losing aprx 300k, Once I pass she collects 68k annually making it a good idea if she survives me by at least 5 years. Of course I can go earlier and she whould have windfall but my dad is 86 and healthy, so I am hopeful that i will last as long. On the other hand, I also dont want to shortchange us now in our relatively younger years will taking home 78 over 68 help us now?

Sorry for the long winding post but I need to decide in the next few days and once I sign that paper it is irrevocvable
Welcome to the Forum!

With a 10-year difference in age, there's an excellent chance that you will die before your wife. And since you're a male and your spouse is female, it's reasonable to expect that she'll outlive you by 13-15 years.

The choices that you're being given are actuarially equivalent; that is, they all have the same present value to the pension plan. I absolutely agree that you should elect a spouse benefit of some type. Whether the benefit is 50% or 75% or 100% could be influenced by how much your DW's life would be affected by the sudden loss of part of your pension.

There's no single "correct" answer to your question. It's a matter of personal choice.

I'm biased toward leaving the survivor with 100%; that is, the payment will be the same so long as either of us is alive. But that's just my preference, and that's the choice I made when I retired in 2018.

Best of luck to you.
Last edited by Stinky on Thu Jan 16, 2020 7:24 am, edited 1 time in total.
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Admiral
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Admiral » Thu Jan 16, 2020 7:20 am

Assuming she gets both her pension plus your survivor benefit if you pre-decease her, 68k and 100% survivor option in my opinion. You only need to wait 7 years and you'll have her pension anyway. What would the benefit be if you worked another year or two? 58 is still fairly young to be retired.

I would not choose 100/0 unless you have significant life insurance.

winterfan
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by winterfan » Thu Jan 16, 2020 7:23 am

In your case, I would take the 100% option too, mostly because of the age difference between you and your wife. We will be making a similar choice in a few years when my husband is eligible for his pension.

BarbBrooklyn
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by BarbBrooklyn » Thu Jan 16, 2020 7:26 am

I was also a NYC employee and had to make these same calculations, although I retired at 65.

The real question for me was, did my pension+SS+withdrawals from my portfolio generate enough income to live on at each of the breakpoints. I think you need to figure out your expenses before you make this calculation.

The other possibility that was mentioned to me when I went for my pension consult was to not designate a beneficiary and buy "level term" life insurance for my spouse instead.

If you are a NYC employee, you can get a financial plan/consult from the NYC Deferred Compensation plan for a very low fee, I think it's$75. And they aren't trying to sell you anything.. I assume that you and your wife are both members.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

Admiral
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Admiral » Thu Jan 16, 2020 7:31 am

BarbBrooklyn wrote:
Thu Jan 16, 2020 7:26 am
I was also a NYC employee and had to make these same calculations, although I retired at 65.

The real question for me was, did my pension+SS+withdrawals from my portfolio generate enough income to live on at each of the breakpoints. I think you need to figure out your expenses before you make this calculation.

The other possibility that was mentioned to me when I went for my pension consult was to not designate a beneficiary and buy "level term" life insurance for my spouse instead.

If you are a NYC employee, you can get a financial plan/consult from the NYC Deferred Compensation plan for a very low fee, I think it's$75. And they aren't trying to sell you anything.. I assume that you and your wife are both members.
+1. Also--assuming you are both SS eligible--you'd also want to choose the pension option that allows you to take SS at FRA or later and not require it at 62, IMO. This is longevity insurance beyond your pension. So, I would not choose a pension option that reduces it to a level where I was required to take SS at 62 to pay my bills.

OP: do you plan to work at all, part time perhaps? You are only 58 and spouse will be working for the better part of another decade. This might also figure into your planning.

aristotelian
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by aristotelian » Thu Jan 16, 2020 7:38 am

How is your health and her health? What are your expenses like?

I would assume conservatively that she will outlive you. However, I would also assume her expenses will go down. I would probably do the 75% option. Maybe the 50% option if that would adequately cover her spending needs when combined with investment income and SS.

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RickBoglehead
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by RickBoglehead » Thu Jan 16, 2020 7:40 am

Make sure you read your options carefully.

If you don't take one of the options, it could be that you also cannot leave your wife the ability to get your insurance benefits after you pass. That's the way my wife's school pension works, she has to reduce her pension with one of the options in order to have me be the beneficiary of the pension AND of her insurance benefits, which are the ability to buy medical insurance from the state under the statewide teacher's plan. Taking the 0% option means if she passes I cannot continue those benefits.
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JoeRetire
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by JoeRetire » Thu Jan 16, 2020 7:42 am

Mariobro wrote:
Thu Jan 16, 2020 1:11 am
My pension is aprox 78k and I am 58. My wife is 48 and retiring in 7 years will have apension of aprx 60k.

My question, I have to choose a beneficiary option and this is how it breaks down:
If I take the full 78, my wife gets nothing when I pass.
If I take 68k my wife get 68k annually once I pass. (100%)
If I take 73k my wife get 36.5k annually once i pass (50%)
I dont have the figure for 75% but I assume I would get aprx 70k and my wife would collect 53 k a year.

Some groundrules:
You can not change your benficiary, even if you get divorced or seperated
If you die before your beneficiary the figure stays the same. (it whould be a loss)
You can never change the beneficiary? I've not heard of that before - is that common for pensions? What happens is she passes before you start to collect your pension? Do you not have a lump sum option?

With a 10 year age difference and males generally living a shorter life than females, it seems like a no-brainer to go with the 100% survivor option. But that might depend on how much difference $10k per year would make in your life.

Don't think of this pension decision in isolation. You need to consider all of your retirement goals, assets and income streams. If you need help making such an irrevocable decision, spend a bit of time with a fee-only fiduciary financial planner.

BTW, what choices does your wife have with her pension? And when does she have to decide?
Last edited by JoeRetire on Thu Jan 16, 2020 7:46 am, edited 1 time in total.
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Admiral
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Admiral » Thu Jan 16, 2020 7:46 am

JoeRetire wrote:
Thu Jan 16, 2020 7:42 am
Mariobro wrote:
Thu Jan 16, 2020 1:11 am
My pension is aprox 78k and I am 58. My wife is 48 and retiring in 7 years will have apension of aprx 60k.

My question, I have to choose a beneficiary option and this is how it breaks down:
If I take the full 78, my wife gets nothing when I pass.
If I take 68k my wife get 68k annually once I pass. (100%)
If I take 73k my wife get 36.5k annually once i pass (50%)
I dont have the figure for 75% but I assume I would get aprx 70k and my wife would collect 53 k a year.

Some groundrules:
You can not change your benficiary, even if you get divorced or seperated
If you die before your beneficiary the figure stays the same. (it whould be a loss)
You can never change the beneficiary? I've not heard of that before - is that common for pensions? What happens is she passes before you start to collect your pension? Do you not have a lump sum option?

With a 10 year age difference and males generally living a shorter life than females, it seems like a no-brainer to go with the 100% survivor option. But that might depend on how much difference $10k per year would make in your life.

Don't think of this pension decision in isolation. You need to consider all of your retirement goals and assets. If you need making such an irrevocable decision, spend a bit of time with a fee-only fiduciary financial planner.

BTW, what choices does your wife have with her pension? And when does she have to decide?
Usually the BENEFICIARY can be changed but not the payment election.

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JoeRetire
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by JoeRetire » Thu Jan 16, 2020 7:48 am

Admiral wrote:
Thu Jan 16, 2020 7:46 am
Usually the BENEFICIARY can be changed but not the payment election.
I agree. I don't have a pension, but my friends who do have never indicated that the beneficiary cannot be changed after a divorce.
Very Stable Genius

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Tamarind
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Tamarind » Thu Jan 16, 2020 7:50 am

Because of the age difference, it seems you are quite likely to receive more money in total with the 100% survivor option. Unless the $10k reduction in pension for higher spouse benefit would cause you financial hardship, I'd take 100% survivor.

You haven't given us quite enough info to optimize though.
*What is your pre-retirement salary?
*What is your wife's expected salary while she is still working?
*What are each of your expected SS amounts?
*What are your current yearly expenses?

It's entirely possible that the real answer is, you should both retire (unless she's waiting for a pension vesting cliff) and start doing Roth conversions as you'll have more than enough regardless. Kudos on two pensions. Unlikely my wife or I will ever have one.

LongRoad
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by LongRoad » Thu Jan 16, 2020 7:50 am

Keep in mind that either of you will face higher tax rates as a survivor than as a couple. If you are both relatively young and healthy, there's something to be said for taking a higher benefit today and banking a portion under the current tax rates while filing as MFJ. It also sounds like your expenses may be higher over the next 5-10 years than later. Plus you have other income sources coming online in the future.

I'll have a similar pension decision in a few years (but not in NY) and will probably take the 100% survivor option as my situation is different. But in your case I'd actually consider the 50% option, IF your spouse agrees and is on board.

Congratulations on your retirement! :sharebeer

trueblueky
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by trueblueky » Thu Jan 16, 2020 7:51 am

I
Mariobro wrote:
Thu Jan 16, 2020 1:11 am
I am retiring this week wth 33 years of service. My pension is aprox 78k and I am 58. My wife is 48 and retiring in 7 years will have apension of aprx 60k.
We live in NYC, have 2 children 10 and 15 years old and no debt. We have a healthy tax deferred annunity that we must make withdrawls on at age 70 and enough for the Kids colleges

My question, I have to choose a beneficiary option and this is how it breaks down:
If I take the full 78, my wife gets nothing when I pass.
If I take 68k my wife get 68k annually once I pass. (100%)
If I take 73k my wife get 36.5k annually once i pass (50%)
I dont have the figure for 75% but I assume I would get aprx 70k and my wife would collect 53 k a year.

Some groundrules:
You can not change your benficiary, even if you get divorced or seperated
If you die before your beneficiary the figure stays the same. (it whould be a loss)

A lot of this is acutary work and can be a bit of a gamble. With a 10 year difference in age I do not think I would take no beneficiary but I am wrestling with the 50/75 or 100% option. Do I take 70 or 73 now, when we still have a lot of bills and expenses with the kids and leave a lil less for my wife once I pass. She will have her 60k pension, soc security and tax deferred annunity withdrawals. What will 100k be worth in 2050?

A general ball park scenario is that I give her 100% and live for 30 years, losing aprx 300k, Once I pass she collects 68k annually making it a good idea if she survives me by at least 5 years. Of course I can go earlier and she whould have windfall but my dad is 86 and healthy, so I am hopeful that i will last as long. On the other hand, I also dont want to shortchange us now in our relatively younger years will taking home 78 over 68 help us now?

Sorry for the long winding post but I need to decide in the next few days and once I sign that paper it is irrevocvable
What is her salary now?

First year of your retirement, as a couple you have 78k plus her salary.
When she retires, as a couple you have 78k + 60k.
Eventually, you have 78k + 60k + two SS.
Some dies, you have one pension plus one SS or two pensions plus one SS.
Do your pensions get COLA adjustment? That makes a huge difference over time.

Lots of moving parts. I would run scenarios on RPM to see these.

csm
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by csm » Thu Jan 16, 2020 7:55 am

I also have a defined benefit pension, but with only one option. My full benefit is the same whether or not I have a spouse beneficiary, and the survivor benefit is 50% with no other option. My husband is nine years younger than me.

We are just making sure that our investments will support any income difference for him if I do predecease him. While unlikely he would do so, we would have enough so that he could theoretically purchase an SPIA to cover the difference so the monthly income would stay stable.

With your wife having her own guaranteed (if, in fact, it is) pension of $60k in seven years, I would be tempted to do the 50% survivor benefit so you are only 'giving up' $5k annually now but the 50% benefit plus her own pension in future should work fine with proper planning. With no debt and kids that will be gone in another 10 years or so, it should be sufficient. I would not do -0- survivor benefit.

You didn't mention if the pension is COLA adjusted, but if it is, that also provides some security.

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Stinky
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Stinky » Thu Jan 16, 2020 7:57 am

Admiral wrote:
Thu Jan 16, 2020 7:46 am

Usually the BENEFICIARY can be changed but not the payment election.
I’d be surprised if the beneficiary could be changed once monthly income is started.

The pension payment is based on a male age 58 and a female age 48. If the ages were different, the monthly income would be different for options with survivor benefits.
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Nate79
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Nate79 » Thu Jan 16, 2020 8:04 am

If you die next week would your family be ok with X% of your pension?

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by niceguy7376 » Thu Jan 16, 2020 8:15 am

If your family can survive on 68K of your pension instead of the 78K, i will go with the "If I take 68k my wife get 68k annually once I pass. (100%)" option. Factor all other income till your kid is off to college on yearly basis and see how it turns out against the expenses.

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by LongRoad » Thu Jan 16, 2020 8:22 am

Nate79 wrote:
Thu Jan 16, 2020 8:04 am
If you die next week would your family be ok with X% of your pension?
This is an important point, and OP should consider the worst case in addition to the more likely cases.

Ideally the short term risk should already be mitigated with term life insurance, whether the OP is working or retired, as there are 2 children still at home. OP: will you have life insurance in force following your retirement?

Plus the children would qualify for SS survivor benefits through the end of high school.

Admiral
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Admiral » Thu Jan 16, 2020 8:26 am

Stinky wrote:
Thu Jan 16, 2020 7:57 am
Admiral wrote:
Thu Jan 16, 2020 7:46 am

Usually the BENEFICIARY can be changed but not the payment election.
I’d be surprised if the beneficiary could be changed once monthly income is started.

The pension payment is based on a male age 58 and a female age 48. If the ages were different, the monthly income would be different for options with survivor benefits.
That's not how municipal pensions work. The spouse/beneficiary age has nothing to do with the payment. My SO can leave her pension to me, or to our (minor) children (though interestingly not to a trust, which is annoying), or to another family member. Their age is irrelevant. The payment is based on which survivor option is chosen.

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by djpeteski » Thu Jan 16, 2020 8:26 am

One option: what would a life insurance policy look like/cost for you?

Lets say you can get a 750K 20 year level term for 2K per year, and after that 20 years you know your wife will be fine financially. Kids will be on their own, other accounts would have grown, she may move to a lower cost of living area.

Then you would be far better off taking the 100% option, and spending the 2K on LI. If you do pass, she should get about 12 years out of the LI policy at 68K and you have none of the restrictions placed on the pension plan. You can cancel the LI or change the beneficiaries. Plus you will have an extra 16K to spend per year.

Admiral
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Admiral » Thu Jan 16, 2020 8:28 am

djpeteski wrote:
Thu Jan 16, 2020 8:26 am
One option: what would a life insurance policy look like/cost for you?

Lets say you can get a 750K 20 year level term for 2K per year, and after that 20 years you know your wife will be fine financially. Kids will be on their own, other accounts would have grown, she may move to a lower cost of living area.

Then you would be far better off taking the 100% option, and spending the 2K on LI. If you do pass, she should get about 12 years out of the LI policy at 68K and you have none of the restrictions placed on the pension plan. You can cancel the LI or change the beneficiaries. Plus you will have an extra 16K to spend per year.
$2k/year for a 58 YO? That seems very low. I have a $1m policy that I got at age 42 and it is $1k. I guess it's possible but I dunno.

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Stinky
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Stinky » Thu Jan 16, 2020 8:33 am

Admiral wrote:
Thu Jan 16, 2020 8:26 am
Stinky wrote:
Thu Jan 16, 2020 7:57 am
Admiral wrote:
Thu Jan 16, 2020 7:46 am

Usually the BENEFICIARY can be changed but not the payment election.
I’d be surprised if the beneficiary could be changed once monthly income is started.

The pension payment is based on a male age 58 and a female age 48. If the ages were different, the monthly income would be different for options with survivor benefits.
That's not how municipal pensions work. The spouse/beneficiary age has nothing to do with the payment. My SO can leave her pension to me, or to our (minor) children (though interestingly not to a trust, which is annoying), or to another family member. Their age is irrelevant. The payment is based on which survivor option is chosen.
Interesting. Different from most all private defined plans. (And not actuarially sound, but that’s another matter)

Thanks for the clarification. I learn something new every day on this Forum.
It's a GREAT day to be alive - Travis Tritt

Admiral
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Admiral » Thu Jan 16, 2020 10:01 am

Stinky wrote:
Thu Jan 16, 2020 8:33 am
Admiral wrote:
Thu Jan 16, 2020 8:26 am
Stinky wrote:
Thu Jan 16, 2020 7:57 am
Admiral wrote:
Thu Jan 16, 2020 7:46 am

Usually the BENEFICIARY can be changed but not the payment election.
I’d be surprised if the beneficiary could be changed once monthly income is started.

The pension payment is based on a male age 58 and a female age 48. If the ages were different, the monthly income would be different for options with survivor benefits.
That's not how municipal pensions work. The spouse/beneficiary age has nothing to do with the payment. My SO can leave her pension to me, or to our (minor) children (though interestingly not to a trust, which is annoying), or to another family member. Their age is irrelevant. The payment is based on which survivor option is chosen.
Interesting. Different from most all private defined plans. (And not actuarially sound, but that’s another matter)

Thanks for the clarification. I learn something new every day on this Forum.
Yes well "actuarially sound" is not often used to describe such plans. :mrgreen:

Certainly it's possible some work differently but when you think about it, I'm not sure how it could be any other way as the secondary (or tertiary) beneficiary's ages are all over the map (as are the primary's). Some retire at 40, others at 75, and everything in between, and thus the spouse's ages are also all over the place. Our plan is a bit more generous than the OP's in that the primary benefit is reduced by 15% for a 100% survivorship benefit. There's also one in between but I forget the calculation.

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Stinky
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Stinky » Thu Jan 16, 2020 10:14 am

Admiral wrote:
Thu Jan 16, 2020 10:01 am

Yes well "actuarially sound" is not often used to describe such plans. :mrgreen:

Certainly it's possible some work differently but when you think about it, I'm not sure how it could be any other way as the secondary (or tertiary) beneficiary's ages are all over the map (as are the primary's). Some retire at 40, others at 75, and everything in between, and thus the spouse's ages are also all over the place. Our plan is a bit more generous than the OP's in that the primary benefit is reduced by 15% for a 100% survivorship benefit. There's also one in between but I forget the calculation.
The way that my company’s plan did it to do was a separate calculation for each employee who was retiring, taking into account both the age and sex of the employee and of the spouse. That’s also the way that an insurance company would calculate the price for a joint life SPIA.

Such an “actuarially sound” calculation probably wouldn’t be practical for a large government employer. So I assume they’re using broad averages.

Just guessing here - I would expect, on average, that government employees and their spouses are roughly the same age. If that’s true, and if the payout options are calculated assuming such an equal age, then someone like OP who has a spouse that is much younger is a “winner” if the employee takes a joint benefit. That’s because the spouse will, on average, collect benefits for more years than if the spouse is the same age as the employee.

Interesting stuff. At least to me.
It's a GREAT day to be alive - Travis Tritt

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by wolf359 » Thu Jan 16, 2020 10:17 am

Admiral wrote:
Thu Jan 16, 2020 10:01 am
Stinky wrote:
Thu Jan 16, 2020 8:33 am
Admiral wrote:
Thu Jan 16, 2020 8:26 am
Stinky wrote:
Thu Jan 16, 2020 7:57 am
Admiral wrote:
Thu Jan 16, 2020 7:46 am

Usually the BENEFICIARY can be changed but not the payment election.
I’d be surprised if the beneficiary could be changed once monthly income is started.

The pension payment is based on a male age 58 and a female age 48. If the ages were different, the monthly income would be different for options with survivor benefits.
That's not how municipal pensions work. The spouse/beneficiary age has nothing to do with the payment. My SO can leave her pension to me, or to our (minor) children (though interestingly not to a trust, which is annoying), or to another family member. Their age is irrelevant. The payment is based on which survivor option is chosen.
Interesting. Different from most all private defined plans. (And not actuarially sound, but that’s another matter)

Thanks for the clarification. I learn something new every day on this Forum.
Yes well "actuarially sound" is not often used to describe such plans. :mrgreen:

Certainly it's possible some work differently but when you think about it, I'm not sure how it could be any other way as the secondary (or tertiary) beneficiary's ages are all over the map (as are the primary's). Some retire at 40, others at 75, and everything in between, and thus the spouse's ages are also all over the place. Our plan is a bit more generous than the OP's in that the primary benefit is reduced by 15% for a 100% survivorship benefit. There's also one in between but I forget the calculation.
This side discussion got me to look it up. NYC pensions have been in crisis and nearly driven the city into bankruptcy. It is currently still in crisis. Source: https://www.nytimes.com/interactive/201 ... sions.html

Both OP and spouse may both be relying on pensions from the same system.

Does OP have other resources in case the pensions take a haircut in the future?

I'd lean more towards the life insurance route because it might create assets that are outside of the pension system should things go wrong.

I'd also make sure they maximize Social Security for the higher earner by waiting until age 70 to collect. Social Security is currently facing a 20-25% haircut in 10-15 years (according to official projections by the Trustee reports, unless the system is changed.)

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Dottie57 » Thu Jan 16, 2020 10:25 am

Stinky wrote:
Thu Jan 16, 2020 7:17 am
Mariobro wrote:
Thu Jan 16, 2020 1:11 am
I am retiring this week wth 33 years of service. My pension is aprox 78k and I am 58. My wife is 48 and retiring in 7 years will have apension of aprx 60k.
We live in NYC, have 2 children 10 and 15 years old and no debt. We have a healthy tax deferred annunity that we must make withdrawls on at age 70 and enough for the Kids colleges

My question, I have to choose a beneficiary option and this is how it breaks down:
If I take the full 78, my wife gets nothing when I pass.
If I take 68k my wife get 68k annually once I pass. (100%)
If I take 73k my wife get 36.5k annually once i pass (50%)
I dont have the figure for 75% but I assume I would get aprx 70k and my wife would collect 53 k a year.

Some groundrules:
You can not change your benficiary, even if you get divorced or seperated
If you die before your beneficiary the figure stays the same. (it whould be a loss)

A lot of this is acutary work and can be a bit of a gamble. With a 10 year difference in age I do not think I would take no beneficiary but I am wrestling with the 50/75 or 100% option. Do I take 70 or 73 now, when we still have a lot of bills and expenses with the kids and leave a lil less for my wife once I pass. She will have her 60k pension, soc security and tax deferred annunity withdrawals. What will 100k be worth in 2050?

A general ball park scenario is that I give her 100% and live for 30 years, losing aprx 300k, Once I pass she collects 68k annually making it a good idea if she survives me by at least 5 years. Of course I can go earlier and she whould have windfall but my dad is 86 and healthy, so I am hopeful that i will last as long. On the other hand, I also dont want to shortchange us now in our relatively younger years will taking home 78 over 68 help us now?

Sorry for the long winding post but I need to decide in the next few days and once I sign that paper it is irrevocvable
Welcome to the Forum!

With a 10-year difference in age, there's an excellent chance that you will die before your wife. And since you're a male and your spouse is female, it's reasonable to expect that she'll outlive you by 13-15 years.

The choices that you're being given are actuarially equivalent; that is, they all have the same present value to the pension plan. I absolutely agree that you should elect a spouse benefit of some type. Whether the benefit is 50% or 75% or 100% could be influenced by how much your DW's life would be affected by the sudden loss of part of your pension.

There's no single "correct" answer to your question. It's a matter of personal choice.

I'm biased toward leaving the survivor with 100%; that is, the payment will be the same so long as either of us is alive. But that's just my preference, and that's the choice I made when I retired in 2018.

Best of luck to you.
+1. Leave the 100% of the pension option for your wife.

I watched a friend of my mom’s had to make due with SS and 50% of pension. It was not pretty. Sad to say she was indeed a happier person without him - even without the full pension.
Last edited by Dottie57 on Thu Jan 16, 2020 10:27 am, edited 1 time in total.

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Ruger » Thu Jan 16, 2020 10:27 am

I'd take the $68K 100% option solely based on the age difference and the fact that you have young kids. My niece recently went through something like this. Her husband retired, drew his retirement pension for less than a year and a half, and then died from cancer. So here she is now, 38 years old with a young daughter and no income from his pension because he took the option to get more money up front instead of less and having survivor benefits. Providing for your family should something happen should take precedence over getting a little more money a year.

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by rterickson » Thu Jan 16, 2020 10:51 am

I also have a municipal pension.

The survivor benefit only applies to my spouse at the time pension payments began. In the case of divorce and remarriage, the new wife would get nothing. If my current wife passes before me though, the pension amount "pops up" to what it would have been without the survivor benefit.

The pension election packet (and the plan document) should spell this all out.

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Admiral » Thu Jan 16, 2020 11:01 am

rterickson wrote:
Thu Jan 16, 2020 10:51 am
I also have a municipal pension.

The survivor benefit only applies to my spouse at the time pension payments began. In the case of divorce and remarriage, the new wife would get nothing. If my current wife passes before me though, the pension amount "pops up" to what it would have been without the survivor benefit.

The pension election packet (and the plan document) should spell this all out.
So you don't have a contingent beneficiary? In our case if I were to pre-decease my spouse (who gets the pension), the kids become the beneficiary if she dies. I would have to check the plan docs about changes once the pension is actually claimed, it's possible that I am mis-remembering.

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by steve r » Thu Jan 16, 2020 11:11 am

My two cents.

Lets say you BOTH live to 80

32 years (wife) X $68,000 = $2,176,000 > $78,000 = 22 years (you) X $78,000 = $1,716,000

You can make more things more complex. What if you saved the $10,000 difference for 22 years and invested it. You would need a fairly decent return to generate an annuity at your death that would pay her $68,000 for ten years. Google annuity calculator Bankrate.com with a 14 percent growth rate you would need that $10,000 annual saving to grow to over $400,000. Of course, she could live longer.

In a sense, this keeps things simple, less of a need for her to save, so you maybe able to have more spending during your life.
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by rterickson » Thu Jan 16, 2020 11:25 am

Admiral wrote:
Thu Jan 16, 2020 11:01 am
rterickson wrote:
Thu Jan 16, 2020 10:51 am
I also have a municipal pension.

The survivor benefit only applies to my spouse at the time pension payments began. In the case of divorce and remarriage, the new wife would get nothing. If my current wife passes before me though, the pension amount "pops up" to what it would have been without the survivor benefit.

The pension election packet (and the plan document) should spell this all out.
So you don't have a contingent beneficiary? In our case if I were to pre-decease my spouse (who gets the pension), the kids become the beneficiary if she dies. I would have to check the plan docs about changes once the pension is actually claimed, it's possible that I am mis-remembering.
Correct, for the Joint & Survivor options (50%/75%/100%) the spouse at the time of retirement is the only option.

If I had taken the Life Annuity (with refund of my contributions only) or the Life Annuity - 10 Year Certain options, I could choose anyone as beneficiary (But only with spouses notarized consent).

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Sconie » Thu Jan 16, 2020 11:42 am

I would be more prone to select the 50% or 75% options. Assuming that your wife outlives you, is she really going to need both 100% of both your and her pension benefits + Social Security? I'd be prone to think not.
I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant. - Alan Greenspan

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Admiral » Thu Jan 16, 2020 11:45 am

Sconie wrote:
Thu Jan 16, 2020 11:42 am
I would be more prone to select the 50% or 75% options. Assuming that your wife outlives you, is she really going to need both 100% of both your and her pension benefits + Social Security? I'd be prone to think not.
They have a 10 YO and spouse is 48. And, far from claiming SS. Interesting that spouse plans to retire with a kid in high school but who knows...

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by SQRT » Thu Jan 16, 2020 11:57 am

I had to make the same choice when I retired 13 years ago. My wife is 7 years younger than I am. Discussed the choice with her at the time and it became obvious to me that our relationship would benefit if I chose the 100% option. My pension reduced by about 9% to “pay” for this option versus the 2/3’rds option. Your “cost” seems quite reasonable. I would take the 100% option if I were you.

Things to consider, other sources of retirement income, spouse’s relative health, lifestyle.

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by 1130Super » Thu Jan 16, 2020 12:27 pm

Do you have any non annuity tax deferred assets ?

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by cashboy » Thu Jan 16, 2020 4:19 pm

Mariobro wrote:
Thu Jan 16, 2020 1:11 am

If I take the full 78, my wife gets nothing when I pass.
not this choice. if you pass on soon and unexpectedly, a lifetime of pension benefits that you worked hard for are simply gone.



i have a megacorp pension and it DOES NOT allow beneficiary changes under any circumstances. !@#$, but that is that. for those with pensions that DO allow beneficiary changes, i am happy for you.
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by 1130Super » Thu Jan 16, 2020 7:11 pm

Admiral wrote:
Thu Jan 16, 2020 11:45 am
Sconie wrote:
Thu Jan 16, 2020 11:42 am
I would be more prone to select the 50% or 75% options. Assuming that your wife outlives you, is she really going to need both 100% of both your and her pension benefits + Social Security? I'd be prone to think not.
They have a 10 YO and spouse is 48. And, far from claiming SS. Interesting that spouse plans to retire with a kid in high school but who knows...
Sounds like a wonderful plan you wont ever get that time back

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by honduranhurricane » Thu Jan 16, 2020 9:59 pm

My wife is 5 years younger. I intend to choose the 100% for her after I die. reason the same as what others have said, women live longer than men and our age difference.

fm3040
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by fm3040 » Thu Jan 16, 2020 10:14 pm

If you can make do with $68K for the next 7 years until your wife retires (she starts ~$60K pension then), it is a good idea to opt for 100/100 and draw your social security at 70.

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Mariobro
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Mariobro » Fri Jan 17, 2020 12:31 am

steve r wrote:
Thu Jan 16, 2020 11:11 am
My two cents.

Lets say you BOTH live to 80

32 years (wife) X $68,000 = $2,176,000 > $78,000 = 22 years (you) X $78,000 = $1,716,000

You can make more things more complex. What if you saved the $10,000 difference for 22 years and invested it. You would need a fairly decent return to generate an annuity at your death that would pay her $68,000 for ten years. Google annuity calculator Bankrate.com with a 14 percent growth rate you would need that $10,000 annual saving to grow to over $400,000. Of course, she could live longer.

In a sense, this keeps things simple, less of a need for her to save, so you maybe able to have more spending during your life.
Thanks for the insight

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Mariobro
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Mariobro » Fri Jan 17, 2020 12:34 am

Admiral wrote:
Thu Jan 16, 2020 11:01 am
rterickson wrote:
Thu Jan 16, 2020 10:51 am
I also have a municipal pension.

The survivor benefit only applies to my spouse at the time pension payments began. In the case of divorce and remarriage, the new wife would get nothing. If my current wife passes before me though, the pension amount "pops up" to what it would have been without the survivor benefit.

The pension election packet (and the plan document) should spell this all out.
So you don't have a contingent beneficiary? In our case if I were to pre-decease my spouse (who gets the pension), the kids become the beneficiary if she dies. I would have to check the plan docs about changes once the pension is actually claimed, it's possible that I am mis-remembering.
No there is no benficiary, if I die before her then it is a loss - additonally this is a nyc uft teachers pension - you can nott change the benficary or plan after 30m days of submitting

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Mariobro
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Mariobro » Fri Jan 17, 2020 12:38 am

rterickson wrote:
Thu Jan 16, 2020 10:51 am
I also have a municipal pension.

The survivor benefit only applies to my spouse at the time pension payments began. In the case of divorce and remarriage, the new wife would get nothing. If my current wife passes before me though, the pension amount "pops up" to what it would have been without the survivor benefit.

The pension election packet (and the plan document) should spell this all out.
correct, only to my wife

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Mariobro » Fri Jan 17, 2020 12:42 am

Dottie57 wrote:
Thu Jan 16, 2020 10:25 am
Stinky wrote:
Thu Jan 16, 2020 7:17 am
Mariobro wrote:
Thu Jan 16, 2020 1:11 am
I am retiring this week wth 33 years of service. My pension is aprox 78k and I am 58. My wife is 48 and retiring in 7 years will have apension of aprx 60k.
We live in NYC, have 2 children 10 and 15 years old and no debt. We have a healthy tax deferred annunity that we must make withdrawls on at age 70 and enough for the Kids colleges

My question, I have to choose a beneficiary option and this is how it breaks down:
If I take the full 78, my wife gets nothing when I pass.
If I take 68k my wife get 68k annually once I pass. (100%)
If I take 73k my wife get 36.5k annually once i pass (50%)
I dont have the figure for 75% but I assume I would get aprx 70k and my wife would collect 53 k a year.

Some groundrules:
You can not change your benficiary, even if you get divorced or seperated
If you die before your beneficiary the figure stays the same. (it whould be a loss)

A lot of this is acutary work and can be a bit of a gamble. With a 10 year difference in age I do not think I would take no beneficiary but I am wrestling with the 50/75 or 100% option. Do I take 70 or 73 now, when we still have a lot of bills and expenses with the kids and leave a lil less for my wife once I pass. She will have her 60k pension, soc security and tax deferred annunity withdrawals. What will 100k be worth in 2050?

A general ball park scenario is that I give her 100% and live for 30 years, losing aprx 300k, Once I pass she collects 68k annually making it a good idea if she survives me by at least 5 years. Of course I can go earlier and she whould have windfall but my dad is 86 and healthy, so I am hopeful that i will last as long. On the other hand, I also dont want to shortchange us now in our relatively younger years will taking home 78 over 68 help us now?

Sorry for the long winding post but I need to decide in the next few days and once I sign that paper it is irrevocvable
Welcome to the Forum!

With a 10-year difference in age, there's an excellent chance that you will die before your wife. And since you're a male and your spouse is female, it's reasonable to expect that she'll outlive you by 13-15 years.

The choices that you're being given are actuarially equivalent; that is, they all have the same present value to the pension plan. I absolutely agree that you should elect a spouse benefit of some type. Whether the benefit is 50% or 75% or 100% could be influenced by how much your DW's life would be affected by the sudden loss of part of your pension.

There's no single "correct" answer to your question. It's a matter of personal choice.

I'm biased toward leaving the survivor with 100%; that is, the payment will be the same so long as either of us is alive. But that's just my preference, and that's the choice I made when I retired in 2018.

Best of luck to you.
+1. Leave the 100% of the pension option for your wife.

I watched a friend of my mom’s had to make due with SS and 50% of pension. It was not pretty. Sad to say she was indeed a happier person without him - even without the full pension.
Thanks for the thougtful and detailed response, I beleive we will take 75%, my wife will have her pension plus 50k from me, plus social, plus our tax deferred annunity (aprx just over 7 figures)

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Mariobro » Fri Jan 17, 2020 12:52 am

JoeRetire wrote:
Thu Jan 16, 2020 7:42 am
Mariobro wrote:
Thu Jan 16, 2020 1:11 am
My pension is aprox 78k and I am 58. My wife is 48 and retiring in 7 years will have apension of aprx 60k.

My question, I have to choose a beneficiary option and this is how it breaks down:
If I take the full 78, my wife gets nothing when I pass.
If I take 68k my wife get 68k annually once I pass. (100%)
If I take 73k my wife get 36.5k annually once i pass (50%)
I dont have the figure for 75% but I assume I would get aprx 70k and my wife would collect 53 k a year.

Some groundrules:
You can not change your benficiary, even if you get divorced or seperated
If you die before your beneficiary the figure stays the same. (it whould be a loss)
You can never change the beneficiary? I've not heard of that before - is that common for pensions? What happens is she passes before you start to collect your pension? Do you not have a lump sum option?

With a 10 year age difference and males generally living a shorter life than females, it seems like a no-brainer to go with the 100% survivor option. But that might depend on how much difference $10k per year would make in your life.

Don't think of this pension decision in isolation. You need to consider all of your retirement goals, assets and income streams. If you need help making such an irrevocable decision, spend a bit of time with a fee-only fiduciary financial planner.

BTW, what choices does your wife have with her pension? And when does she have to decide?
Thanks Joe, no you can not change the beneficiary, my wife will keep 100% when she retires in about 7 years. I'm thinking of going for the 75% I'm taking approximately 71 k with her getting approximately 53 k. I found out I can change it up to 30 days after I have submitted my paperwork

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by Mariobro » Fri Jan 17, 2020 1:02 am

Thank you to all that jumped in, my brother-in-law told me about bogleheads and I'm glad he did. I found out today that I have 30 days after I file to change my decision but as of now I think we will go with the 75% option. With our age differences it's too much of a Gamble to give up on that guaranteed income in the event of my passing before my wife. At the same time vanity wants me to say I make more than 70k on my pension and the extra few thousand dollars won't hurt either.

As I begin retirement I don't think this will be the last time I will use this forum, thanks again

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by sergeant » Fri Jan 17, 2020 1:41 am

Admiral wrote:
Thu Jan 16, 2020 8:26 am
Stinky wrote:
Thu Jan 16, 2020 7:57 am
Admiral wrote:
Thu Jan 16, 2020 7:46 am

Usually the BENEFICIARY can be changed but not the payment election.
I’d be surprised if the beneficiary could be changed once monthly income is started.

The pension payment is based on a male age 58 and a female age 48. If the ages were different, the monthly income would be different for options with survivor benefits.
That's not how municipal pensions work. The spouse/beneficiary age has nothing to do with the payment. My SO can leave her pension to me, or to our (minor) children (though interestingly not to a trust, which is annoying), or to another family member. Their age is irrelevant. The payment is based on which survivor option is chosen.
My municipal pension through Cal PERS absolutely bases payment on the age of the beneficiary. If we make a minor the beneficiary pension payments stop when minor turns 18. It cost my buddy a couple hundred more a month than it cost me for the same survivor benefit cause his wife is 11 years younger than him and my DW is only 2 years younger than me.
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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by JoeRetire » Fri Jan 17, 2020 8:51 am

Mariobro wrote:
Fri Jan 17, 2020 12:52 am
Thanks Joe, no you can not change the beneficiary,
Hmm. That seems overly restrictive to me. I guess I don't have enough friends with pensions.

If the designation of beneficiary is irrevocable, I'd be tempted to name my children as beneficiaries, assuming my wife didn't need the money to maintain her standard of living.
my wife will keep 100% when she retires in about 7 years. I'm thinking of going for the 75% I'm taking approximately 71 k with her getting approximately 53 k.
Seems reasonable. Are either of your pensions COLAed?
Very Stable Genius

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Re: Leave my beneficiary 100/75/50/25 or 0% of my pension?

Post by JoeRetire » Fri Jan 17, 2020 8:54 am

Mariobro wrote:
Fri Jan 17, 2020 1:02 am
Thank you to all that jumped in, my brother-in-law told me about bogleheads and I'm glad he did. I found out today that I have 30 days after I file to change my decision but as of now I think we will go with the 75% option. With our age differences it's too much of a Gamble to give up on that guaranteed income in the event of my passing before my wife. At the same time vanity wants me to say I make more than 70k on my pension and the extra few thousand dollars won't hurt either.
Be careful about that vanity thing. It can lead to lots of sub-optimal decisions. (Or rather it can lead to vanity-optimizing, but financially-deoptimizing decisions) :wink:
As I begin retirement I don't think this will be the last time I will use this forum, thanks again
Good luck.
Very Stable Genius

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