Story & Photo – Joseph Boyle
This article is about keeping your financial house in good order.
When you retire, please, please, please take a good long look at your retirement plan settlement options. Do the right, ethical, smart and loving thing during your decision making process.
Here is an example of how it works. Let’s say the husband is going to retire. He has a minimum of two options for his retirement income. The following dollar amounts are for illustrative purposes.
Option 1: $3,000 a month for life. If the husband dies, the lifetime income stops and his wife gets zero. Zero! Zero! Zero! She might have to live under a bridge. While it is a natural human behavior to be immediately blinded by a larger dollar amount under option 1, it is not necessarily always a well thought out choice. A poor decision is then often bolstered with the thought, “I am not going to die.” “She can work.” “She can remarry.”
Option 2: $2,700 a month for life with a right of survivorship. There is a $300 adjustment for the two-person lifetime benefit. If the husband dies, the lifetime income continues to be paid to his wife. She gets $2,700 for the remainder of her life.
Before making your final choice, you can check how much it might cost per month to purchase life insurance to cover the $2,700. The premium will be based on your age and health. Typically, the $300 adjustment will look like a bargain compared to an insurance premium. The $300 is simply your cost for your retirement vendor’s promise to make a much larger financial payout to you and your wife.
Properly done, your wife can remain in the family home. She does not have to move in with your children.
In some plans, if the wife predecease the husband, the husband’s retirement income moves back up to the full $3,000 a month since the retirement vendor is no longer responsible for providing lifetime survivor income to the wife.
During my financial planning career, some husbands told me they were not going to leave their wife any money. They went on to state that she would just spend it with another man. Maybe so, but at least she is not forced to live with another man because she lacks independent income. If she does remarry and spends your money with another husband, so be it. If you really love her, you can set her free after you are gone. You can provide her the opportunity to be safe, secure and happy.
If she does not remarry, she can live independently with the lifetime income you have provided.
Some men think, “This is my money. I worked for it. I want the $3,000 maximum payment. After I die, she is on her own.” While you may be right about having worked for this retirement money, if you are married to a good woman, she worked hard too. She took care of your home. She took on the lion’s share of bringing up your children. Lastly, she took excellent care of you by providing you with nutritious meals and by taking care of your clothing in order that you could then go to work fully prepared.
For loving couples, we are in this life together. We should take care of one another.
I have friends who made the wrong or possibly uninformed decision. They ended up making what could be viewed as a selfish choice.
They chose the $3,000 retirement option with no right of survivorship. One of my friends died right away. When he died, the $3,000 died with him. His widow was financially devastated. This couple had worked hard and had enjoyed a high achievement lifestyle. Now she is financially strapped for the rest of her life.
If you are married to an evil witch of a woman, I will let you make your own choice. If you are married to a good woman, know that a good woman is hard to find. If you love her, do not leave her on the curb with the garbage, when you close your eyes for the last time.
If it is the woman who is retiring, the concepts I am speaking of might well have equal application.
I have tried to think of many alternative scenarios in an effort to find a situation where taking option 1 with no right of survivorship makes sense. So far, I can only find two reasons for committing what might be thought of as financial suicide.
Reason 1: The life insurance premium for you is less than the $300 retirement income adjustment. If that is the case, take Option 1 for the full $3,000. Pay your premium out of the extra $300. You will be dollars ahead.
Reason 2: If your wife is terminally ill and only has 6 months to live, then taking option 1, if your plan does not have the automatic step up feature, could make sense.
You do not have to take my word on all this. Think it through for yourself and then apply common sense to your individual situation. Consult with an accountant, lawyer and / or financial planner.
If you do not have a financial planner, Bart Dalton who is with Edward Jones / phone: 253-581-3963, could be a resource for you. Bart consistently supports our community newspaper with his advertising, a sample of which is located to the right of my article.
Whatever you do, please make the best choice for your family. Make the right choice and you can show your love for her when you are dead and gone!