My wife and I recently had a conversation about retirement and what payment option I would choose when I retire. At first, she was shocked to find out that I may not pick the option that pays the largest monthly benefit to her. It’s not that I am just being mean and don’t want to provide as much for her when I pass away. Instead, it’s about the two of us enjoying retirement together while still providing her with a benefit when I pass away.
As you may know, there are several different payment options to choose from when you retire. Some options pay for two lifetimes, while another pays for only your lifetime, and another that pays for your lifetime and guarantees 120 payments to be made in total between you and your beneficiary if you pass away within 10 years of retirement. Also, you can add a Partial Lump Sum to any of the previously mentioned options. Click Here for more information about payment options.
The options I am most interested in are the joint survivor options, Option A and Option B. Each of these options will pay a portion of my monthly benefit to my wife for the remainder of her life once I pass away. Option A, though, pays the beneficiary more than Option B. Option A, of course, is the payment option my wife wants me to choose.
However, my wife is a public school teacher and she participates in Missouri’s Public School Retirement System. When she retires, she will be receiving a guaranteed monthly benefit from her retirement system for the rest of her life. So, she will already have a secure retirement income source and she may not need as much of a benefit from me after I pass away, since she already has her own.
My plan is to choose Option B. This way, she can still count on a portion of my benefit for life, but it won’t be as large as Option A. That’s my plan for now, but you never know and my plans may change as retirement approaches. . In exchange for her smaller benefit, I will receive a larger monthly benefit. Now you’re thinking I’m just selfish But, by receiving a larger benefit, it may allow us to do more things together in retirement before I pass away. That’s all part of the plan for our retirement. While I want to provide my wife with the ability to continue to live the same lifestyle we were living before I pass away, we also want to do as many things on our bucket list together in retirement. So, by choosing Option B, I provide myself with a little bit more monthly retirement income that will allow us to go on more adventures in retirement. Also, it will still provide a small monthly benefit once I’m gone. Coupled with her pension, it will keep her financially comfortable until she passes away.
So, as you can see, it really isn’t about me being selfish and not wanting to provide for my wife. It’s more about what we want to do in retirement and keeping her financially secure once I pass away. Option A may seem like the best bet for your spouse because it is a largest amount they could receive, but it may not be the best option for you.