If I Go First

Richard Quinn

I MARRIED CONNIE because she’s four years older than me. That meant our life expectancies would be similar and hence a survivor annuity would be less expensive.

I am, of course, joking. Sort of.

Providing for Connie, should I be the first to go, is among my top financial priorities. During my working years, I received far too many calls from new widows who had just learned their husband’s pension stopped when their husband died. Apparently, the husbands hadn’t bothered to mention this.

With traditional pension plans now relatively rare, at least among private sector workers, the days of worrying about a traditional survivor pension are all but over. Still, ensuring a surviving spouse has adequate income remains a crucial issue—and yet it’s one I rarely see discussed on the various blogs and Facebook groups I follow.

There’s a handful of ways to provide for a surviving spouse:

  • Social Security survivor benefits
  • A defined benefit pension with a survivor annuity
  • An immediate annuity with guaranteed dual-life payments
  • Life insurance
  • Naming the spouse as beneficiary of 401(k) plans and IRAs
  • Leaving behind taxable-account investments and savings

My strategy draws on the above ideas. When I die, Connie’s Social Security spousal benefit will disappear and be replaced with double the amount, thanks to the survivor benefit that’s equal to my current monthly Social Security amount.

Decades ago, we both naively purchased—or, more accurately, were sold—tax-deferred variable annuities. We stopped adding new money to these accounts many years ago, but their value continues to grow, and Connie will have that pool of savings available to her.

I have two pensions. Both are so-called joint-and-survivor. Assuming I die first, Connie will continue to receive monthly payments equal to 50% of one pension and 75% of the other.

She would also receive payouts from two life insurance policies. During my working years, I invested in group variable universal life insurance. Over the years, the investment fund accumulated and, when I retired, I converted to a paid-up policy. I also have employer-group insurance, for which I continue to pay a monthly premium. The payout on these two policies should provide Connie with about two years of living expenses.

My wife, of course, is the named beneficiary on my rollover IRA. Meanwhile, our taxable investments are jointly owned, and are structured to generate regular income. That includes taxable-bond interest, tax-free interest from municipal bonds, and dividends on two stocks.

Connie could dip into our portfolio to pay living expenses, but I’m hoping the portfolio stays intact for our children and grandchildren. How Connie will handle our portfolio concerns me—up until now she’s shown no interest in investing. In a letter of last instruction, I’ve explained where to go for assistance.

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