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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:
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.
Sounds like your worth more dead, you better be careful.
Great article! My personal experience was similar. The unspoken assumption was I would be the first to go and I planned for my wife of 45 years, Dorothy, to have very few issues when I die. It did not happen that way. While I have moved forward, there has been an emotional cost in failing that unspoken assumption.
My personal letter of instruction has now ballooned due to things my children do not know. For example; Dorothy knew the location of the safe and the combination, the kids do not. The institutional knowledge is gone.
My condolences on losing your wife. Hang in there…
Richard: I have a very intelligent spouse of 50 years, come June. Her interest in finances, however, have never been less than they are currently. She knows what we have and she knows that if I were to not wake up tomorrow, she would never need to be concerned about income for life.
I waited until 70 to file for SS. We have 4 Deferred Annuities that will produce tax free income, since they were funded with Roth Dollars. (All are Joint & Survivor.). Each year I don’t “turn them on,” their income value increases by 8.25%. If we turn them on in 7 years, as planned, they will produce @$58,000 annually, again income tax free.
Like you, making sure my wife is provided for has always been a major responsibility in my mind. I am somewhat old school in that way. Although I no longer carry life insurance (other than paid funeral policies and a $10,000 policy provided by my college, when I retired,) one of the first actions I took when I got married in 1974 was to purchase life insurance.
I have written my wife a “final love letter,” which is updated as needed, monthly. It outlines all of our holdings, where they are, user names and passwords, and the names of those advisors who will be able to assist her after I am gone. In addition, there are funeral instructions and all the related information regarding our prepaid funeral arrangements. am four years older than my bride, and I have made it a point to hire advisors younger than we are.
In my “final love letter,” I have given her my thoughts and recommendations but also made it clear that after I am gone, everything is hers to do with as she chooses.
For decades I have advised clients and later in life my students that the day will come when “The Trifecta of Grief” will occur. 1. Your spouse will die 2. Your SS benefits will drop 3. Your tax classification will change to single. There is nothing you can do to avoid it, but you can prepare for it.
Hopefully everyone will do something similar to what I have done, since according to all the research, the vast majority of couples have one person managing the family finances, and if that person passes first, well…let’s just say it is not ideal.
Thanks for another great article.
My wife also has little to no interest in our finances other than having enough money to pay the bills on time. I have assured her that unless there is a worldwide financial Armageddon she should be financially set at least until she reaches 100. If there are financial issues after that I will be long gone and it will be up to her and our children to figure it out as I will be long gone based on my family’s life expectancy. Why at least 100? Well just this past month her mother moved into our house, leaving independent senior housing after turning 102 still without significant health issues.
I appreciate the effort the author has made to provide for his wife if he dies first. At the same time, I do wish his wife was more actively involved with the plan. That probably can’t start when couples are in their 7Os or 80s. And the phenomenon of the passive wife may be a leftover from the breadwinner/homemaker dichotomy. But the result may be less than optimal. I have several friends whose husbands provided well for them. Nonetheless, they have faced major problems ranging from paying monthly bills to managing large IRAs. And I totally agree with the writer belief who discussed the impact of taxes. That is a huge problem now and may get greater in the future.