RE:RE:RE:RE:Off Topic: Retirement Annuity QuestionRound #2, Actuaries are human The $700k question here is:
How steep is the discount to the full pension if you choose "survivor benefit" option?
We need to know that figure before making informed decision.
Actuaries are good at math...
But they are paid to generalize things, so they may have predetermined number of years for surviving spouse to outlive the pension contributor/owner.
Let's say they expect your spouse to outlive you by 10yrs, yet you expect her to enjoy 15yrs of freedom, then logical choice is likely "survivor benefit" option.
Here's an example, same pile of leaves with varying time horizons:
PV = Present Value = Pile of money they have earmarked for Nukester today = $697k
1.
Nukester
Pays him $35k/yr
# of years = 25
Annual inflation rate @ 2%
2.
Nukester wife using actuary 10yr departure diff
Pays out $27,325/yr
# of years = 35 (ten more years)
Annual inflation rate @ 2%
3.
Nukester wife using your expected 15yr departure diff
Pays out $24,950/yr
# of years = 40 (fifteen more years)
Annual inflation rate @ 2%
All those 3 payouts came from the same pile of leaves, the $697k.
Just extended the number of years of survivor to 10 and then 15.
Figure out the discount they are offering, then take it from there!
The wonderful world of compounding applies here if your spouse shows characteristics of being a long-life pension-drainer. She could be the anomaly that pension managers don't always plan for. 15yrs is a fairly hefty difference. Take advantage of their bad math if that's the case.