Financial decisions should benefit everyone in the long run

October 24, 2012 

I was counseling a couple recently, and found myself having a deja vu experience. In other words, I had been here before.

We were sitting in my office, and the husband was showing me his pension options. With a pension, you can either take out the lump sum and invest that money somewhere, or select a monthly payment option. After the lump sum option, the next in line was titled “single life.” If this option is selected, he would receive that amount of money, each month, for as long as he lives. And, if he died, his wife would get nothing.

The next options included survivor benefits, meaning if he died and she was still living, she would receive a portion of his pension income for the rest of her life. The conversation went like this:

Husband: My philosophy is that I should get as much money as I can now, and when I die, she can take care of herself. I figure I’ll live 20 more years.

Here, I glance at the wife, who does not say anything.

Sherri: Do you realize that if you signed up for this option, and died three months later, that nobody else would receive anything?

Husband: Yes, but that’s the chance I’m willing to take.

Sherri: But what about your wife? She could potentially live a very long time and will need income.

Husband: Well, then she may need to keep working.

Again, I glance at the wife, who still says nothing.

Sherri: Let’s look at this another way. Let’s say you take the single life option on your pension, which will pay you $1,800 per month for the rest of your life. If you live 20 more years, you will have received $432,000 in pension income.

Let’s compare this to an option that includes survivor benefits, because women statistically live seven years longer then men. So let’s say you take the 50 percent survivor option, so you begin receiving $1,600 per month, and you live 20 more years so she receives a total of $384,000. Now, because you selected the 50 percent survivor benefit, your wife begins receiving $800 per month She lives another seven years because she is a woman, so she receives $67,200 over this period. You receive a combined benefit of $451,200, which is more than if you took the single life option and died after 20 years.

I added that we are all living longer than ever before, so inflation needs to factor into this decision.

The combination of living longer and expenses going up means we need to ensure we will have enough income for the future. And when one of them dies, they will lose one Social Security check. So if he took the single life option, she would lose two streams of income upon his death.

At the end of the appointment, I was still uncertain as to what he planned to do. I have seen this scenario multiple times, and the pension owner could be the husband or the wife. It is hard to imagine what life will be like in our 70s and 80s, but the one thing I can tell you for sure is you’re not going to want to be broke. Make financial decisions that benefit everyone involved for the long run.

Sherri Goss is vice president of Rosenberg Financial Group Inc., with offices in Macon and Warner Robins. Contact her at 922-8100 or

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