retirement payout question

**daddyhoney** · #1 01-06-2007, 08:54 AM

I asked in a previous thread about rolling my 457 tax defered savings into a variable annuity and have now decided to let those dollars remain in the original plan for the present time. Thank you all for that guidance.

As a retiring city police officer, I will have monthly payments comming to me from the Texas Municipal Retirement System. When I retire I am given a one time choice of six options on how to receive my money.

Amount #1 for life and the same amount to the surivior for life.
Amount #2 for life and 75% to the survivor for life.
Amount #3 for life and 50% to the survivor for life.
Amount #4 for life and the same amount to the survivor for five years.
Amount #5 for life and the same amount to the survivor for ten years.
Amount #6 for live and the same amount to the survivor for fifteen years.

As you might suspect, amount number 4 is the greatest monthly option.

What my financial guy recommends is to take option number 4 and purchase from him a term policy that in the event of my death will provide my spouse the the same monthely income. More specifically, option 4 will give me about $600 a month more income, but the term policy will cost $385 a month to provide $420,000 in insurance to fill that gap.

I do not know if this is enough information to help get me the answers I need on making that choice.

I have decided to seek a fee only financial advisor in my area to give me unbiased information. Any recommendations in the Baytown area are appreciated. Thanks Gary

**Reel-tor** · #2 01-06-2007, 09:37 AM

I was a Benefits Manager for a Fortune 50 firm and had to talk to many people planning their retirement. The issue you are struggling with (ie, what retirment option should I chose?) can only truly be answered only with 20/20 hindsight! I finally came up with the perfect "answer" to the question of "what retirement benefit should I chose?"

The "answer" is "Please tell me, exactly, the date you will die so I can compute the answer to your question"

Now, that may sound flippant but it really is the one piece of information that is needed to perfectly advise anyone what option will be best for them. Of course, we don't know that date and that's what makes everything we do in planning nothing but a "good guess".

So bearing that in mind here are some questions that I recommend you answer to yourself (don't post on the internet):
1). What is your health and, realisticly, do you expect to live beyond "normal" projections (currently men can reasonably expect to live to 80 -some say 82, some say 76-depends on your family genes, family history of cancer, smoker, etc).
2). Same question as #1 but for your spouse.
3). Other than your spouse do you have to support any child, grandchild, parent after your retirement?
4). Other sources of income? Social security? Wife's pension?

And, finally, remember that no matter what choice you make, assumptions made probably won't work out as anticipated but you gotta make a decision based on best available guesses and assumptions.

Good luck!

BTW, the option to buy term to cover your spouse--does the $385 premium stay the same or does it go up over time? I'll bet it goes up which means the $600 gain which immediately becomes (600-385) $215 net gain will slowly be reduced and may even disappear. Of course, the agents commission will not.

**Mustad7731** · #3 01-06-2007, 11:05 AM

Reel-tor;
I think you just about summed it up...I'm a good friend of daddyhoney's and he's
struggling with what I'll be struggling with in about 4 more years...
You look at the hand that you have been delt, and place the best bet that you
can...And hope that you don't foul thing up too badly...
My $.02....
Mustad7731
Jackie

**daddyhoney** · #4 01-06-2007, 11:14 AM

Thanks for the input guys. Daddy honey

**Sow Trout** · #5 01-06-2007, 12:31 PM

The first thing you should do is get rid of that financial guy. He sounds more interested in his welfare than in yours. Your decision to find a fee only advisor is a good decision. What Reel-tor said is right on target. Make your best guess with the help of a good advisor and hope for the best. Another thing about the term insurance is even if the premium doesn't increase for a while, it will later and it is term,meaning it will end at the end of its term, leaving no coverage.

**MikeV** · #6 01-06-2007, 12:37 PM

Reel-tor said it well. The choice is hard since life expectancy of two people is involved. Also heed his advice on the insurance situation.

**seachaser05** · #7 01-06-2007, 01:42 PM

Quote:

Originally Posted by MikeV

Reel-tor said it well. The choice is hard since life expectancy of two people is involved. Also heed his advice on the insurance situation.

Being an ex insurance agent for a life/health company, watch what they are trying to sell you. When an individual reaches a certain age term life become more than whole life coverage so be very careful of any term policy especially if you are getting close to retirement age.

**Reel-tor** · #8 01-06-2007, 02:25 PM

Daddy Honey: feel free to PM me with questions. I will NOT make decisions for you but I can, perhaps, discuss some of your concerns. I don't sell anything. I just have 30 years experience in benefits.

Howard

#9 01-06-2007, 03:47 PM

Quote:

Originally Posted by Mustad7731

Reel-tor;
I think you just about summed it up...I'm a good friend of daddyhoney's and he's
struggling with what I'll be struggling with in about 4 more years...
You look at the hand that you have been delt, and place the best bet that you
can...And hope that you don't foul thing up too badly...
My $.02....
Mustad7731
Jackie

This may be a little late for daddyhoney, unless he is going to contiunue working at another job, but you might consider starting a ROTH account. The money you put into a Roth is after-tax money from your earned income. Since you have already paid tax on it once, neither the principal nor all the interest earned are tax free and there is not fixed time by which you must start withdrawing from the account.

RE insurance and annuities, I would stay away from annuities and anyone who tries to sell you one as a first option. With regard to insurance check out some of the plans AARP sponsors. I think they are pretty honest, and they certainly have the best auto insurance for people over 55.

"old cheese & mildew" ~ just my 2 scents

**KneeDeep&Sink'N** · #10 01-06-2007, 11:53 PM

75 percent of your money out and roll it over into other investment accounts. If you do this, it will most likely only affect your monthly payout by two or three hundred dollars. You can easily make the difference up. I plan to take my 75 percent and roll it over, but not in the type of plan you described. If you don't pull your money, you most likely won't live long enough to even touch the city's money. (They count on that, ya know.) Even when you pull your 75 percent, it will take you probably 5-6 years to go through your own money and get to the city's contribution.

If you are participating in ICMA, I would strongly recommend you get a hold to Tiffany Keeling. (She got married and I don't know her married name.) ICMA advisors are salaried and do not make commissions. They have helped a lot of people retire earlier than was thought possible by showing them how to roll this money over and re-investing it with little risk.

If nothing else, please heed what Reel-tor and others are saying. - Craig