After You Leave

Richard Quinn

VIEW ANY NUMBER of YouTube videos on retirement planning, and you’ll find advice on how much you need to save each month, how to invest, how much to accumulate and how to generate retirement income. The same is true for the experts who write blogs.

All this information relates to the retiree. Rarely—actually never—have I seen a discussion about survivor benefits. Even the 4% rule uses an assumed 30-year retirement period, apparently ignoring the possibility that retirement income needs to last over two lifetimes that may extend beyond 30 years, a distinct possibility if one partner is several years younger.

I’m sensitive to this issue because, during my working years, I received many calls from new widows asking about their survivor pension. Often, there was none because their husbands had selected to receive income only over their life, with no survivor benefit. Times have changed, of course. There are new laws to protect spouses, plus many couples have dual incomes. But at the same time, retirement is more the individual’s responsibility than ever before.

Given the reported dismal state  of retirement planning, I wonder if people are thinking about dual lifetimes. Couples should have detailed discussions about how much income there will be after the first spouse dies.

Does each spouse have their own income source? Are they drawing from a single pool of retirement assets? To what extent do they count on Social Security? What’s the age difference between the couple?

I have both a qualified and nonqualified pension. I selected a 50% joint-and-survivor annuity for one and 75% for the other, meaning my wife will receive half and three-quarters of these two pensions, should I die first. Opting for the survivor annuities reduced the monthly payout on the two pensions, but the reduction was worth the peace of mind. On top of that—and contrary to conventional wisdom about dropping coverage as you grow older—I maintain life insurance equal to about two years of expenses. My wife will also have access to our investments.

It’s all a bit conservative, I admit, but I don’t want my wife worrying about money, even if she should require long-term care, and I don’t want to create a financial burden for our children. Want to make sure a surviving spouse has enough money? Here are five pointers:

  • Plan on Social Security survivor benefits, but remember that—upon the death of the first spouse—your household’s total Social Security benefits could drop by a third or more.
  • Ensure accumulated assets are sufficient for two lifetimes, and perhaps longer than the often-assumed 30-year retirement.
  • When selecting pension coverage, choose the survivor option.
  • For additional lifetime income, consider using part of your retirement nest egg to purchase an immediate annuity that pays income over both of your lifetimes.
  • Purchase life insurance so the surviving spouse receives a lump sum upon the other spouse’s death.
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