You’re married and everything seems to be going just fine in retirement. You or your spouse have a sixty thousand dollar single life only pension, you each get twenty thousand dollar per year in Social Security, and you’re not tapping into your one million five hundred thousand dollar portfolio you have saved.
Everything seems perfect but there’s a huge problem in your finances. If you or your spouse dies, the survivor loses the sixty thousand dollar pension. When you retired, you elected to choose a higher annual pension income that would be paid for the life of the spouse who earned the pension, rather than take a reduced benefit and select an option that would be paid to the surviving spouse for life.
This is a big problem. If you die, your spouse loses 100 percent of your sixty thousand dollar pension.
There’s another problem. When either of you die, the survivor loses one of the twenty thousand dollar Social Security incomes. So, while you both were living everything was peachy keen, you had one hundred thousand dollars of gross annual income. But if you, the spouse who earned the pension, die, the surviving spouse is only going to get twenty thousand dollars of annual income, losing eighty thousand dollars per year.
Here’s the worst part. Your current assets, that will be needed in the future to create replacement income for the surviving spouse, are invested with a moderate, maybe even high, amount of volatility and risk. If these funds suffer a loss there may not be enough assets to provide enough replacement income for the surviving spouse who loses the pension.
All you have to do is follow 3 Simple Rules. Rule #1- Create a written retirement income plan that shows how much income the surviving spouse will receive for as long as he/she lives, showing how much income they will receive every year, where each income source will come from, and knowing when each income source starts, stops, increases, and decreases.
Rule #2 – Minimize, even eliminate the risk, on the assets needed to create income for the surviving spouse. No matter what, you can’t afford to lose any of this money.
Rule #3 - Create future income for the surviving spouse that’s guaranteed to be paid to them for as long as they live. This income must be guaranteed for life and not be subjected to stock market risk or volatility.
If you’d like help implementing these 3 rules to create pension replacement plan, call us today.
Vipul Varma
VIP Financial
402.547.0395
Financial Advisor in Parker Colorado
Estate Planning