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Right now, the last thing you and your spouse want to talk about is what happens to the survivor's financial security when one of you dies.
But facing this tough issue now and making plans for it will bring a peace of mind that lets you enjoy your retirement that much more.
Here are six tips to ensure your surviving spouse will have enough retirement income to live on when you're gone.
Take financial inventory
Patrick Astre, a Certified Financial Planner in Long Island, New York, and author of This Is Not Your Parents' Retirement, says couples neglect this essential step far too often. "First you have to see what you have," Astre says. "Sometimes there just isn't enough to protect anyone."
Cindy Hounsell, president of the Women's Institute for a Secure Retirement (WISER), suggests that couples sit down together and make a checklist of the income that will exist before and after the death of each spouse.
"When people are thinking about retirement, they have to think about where the income is going to come from, and which pieces are going to last for the rest of (their) lives," she says.
If your spouse has retirement assets in his or her own name, include it in the mix, and factor in whatever life insurance policies you have with your spouse as the beneficiary.
"Most public employers are going to offer some amount of life insurance benefits, separate and apart from the pension fund," says Keith Brainard, research director for the National Association of State Retirement Administrators.
If you don't have life insurance, consider if you need to buy it for extra spousal protection. "If you die, your spouse gets the IRA [retirement benefit], but is that going to be enough for him or her?"
Astre asks. However, if you're going to buy life insurance, do it before you retire. As you get older, life insurance becomes much more expensive, and the available policies usually won't offer much coverage, he says.
Learn the pension rules
Depending on where you work and what type of pension plan you have, the law may require that a survivor's benefit be made available to your spouse.
Accepting this benefit usually means the amount of money you receive during your lifetime is reduced, but without it the retirement checks stop coming when you die.
Private sector employers (and unions) usually offer traditional defined-benefit pension plans which mandate the provision of an annuity to the surviving spouse.
You may waive this benefit. But if you want the survivor's benefit, you'll choose what's called a joint and survivor annuity payment; if not, you'll select the single life annuity.
Defined-contribution plans, profit-sharing and stock option plans are usually not required by law to include a survivor's annuity.
However, spouses are the presumed beneficiaries of these retirement accounts, and your spouse must consent in writing if you want to leave the assets to someone else.
Pension maximisation
If you choose the single life annuity over the joint and survivor annuity, you can use some of the extra monthly income to purchase life insurance.
Then if you die first, the proceeds from the life insurance can be used to buy a lifetime annuity for your spouse. This strategy is known as pension maximisation.
If you pick the right policy and your health is good, pension maximisation is a good bet, author Patrick Astre says. "If you are in poor health," he says, "the (insurance) rates are going to be so high that it's not going to work."
Astre warns early retirees considering pension maximisation that "there's a lot of life left to cover."
"If you're retiring at age 55, and you have a spouse roughly the same age, then you've got another 30 to 40 years of life to cover," he says. "It's very expensive to provide enough to cover 40 years of life at the same income."
According to Astre, that cost is likely to be more than the additional monthly income you gain by selecting a single life annuity.
A solution: Astre prefers using a combination of insurance policies - term policy and whole life policy, instead of just one.
Social security options
The Social Security spousal benefit (mainly in the US context), which pays up to one-half the retired worker's benefit while he or she is living, discontinues when that worker dies.
However, widows and widowers who are at full retirement age or older get 100 per cent of the deceased retiree's full benefit or their own - whichever is larger.
"A lot of people don't know that you only get one benefit when the spouse (dies)," says WISER president Cindy Hounsell. Those who are younger receive reduced survivor's benefits at varying increments, depending on their age.
Plan for future circumstances
Once you've determined what income streams you already have in place, consider what you and your spouse will need in the years ahead so you can make plans to fill the gaps.
Be sure to take stock of your heath, the possible long-term care needs of both you and your spouse, as well as the rising cost of health care, Hounsell advises.
Research from the Employee Benefits Research Institute reveals that while 41 per cent of current retirees in the US are able to get health insurance through a former employer, many employers are cutting out coverage for future retirees.
According to EBRI senior research associate Paul Fronstin, coverage of spouses is usually available for retirees who receive health care benefits from their former employers.
Some plans continue to cover the spouse after the death of the retiree, while others do not. "I don't know if I've ever seen statistics on what percentage of plans would cut off family members after a retiree dies, but it's totally up to the plan," Fronstin says.
For high-income couples, consider the impact of estate taxes on surviving spouses, says Bruce Fenton, managing director of Atlantic Financial in Boston. "There are some sophisticated life insurance products that have ... tax deferral benefits."
For example, variable universal life insurance policies can be designed to provide tax-advantaged income during retirement, in addition to the death benefit.
These are complicated insurance instruments, so be sure you understand whether they make sense for your particular situation by talking to a knowledgeable, unbiased financial planner who doesn't get paid by commissions.
Get some good advice
A research report indicates that while most retirees say they have a strong desire to consult a qualified professional to help manage their retirement savings plans, they are actually more likely to ask family and friends for advice. And that can get them into trouble.
"Family and friends most often do not have the skills to help someone plan for the financial aspects of retirement, nor do they always act selflessly when advising loved ones regarding financial issues," says Public Misperceptions About Retirement Security, a report by the Society of Actuaries, LIMRA International and Mathew Greenwald & Associates.
If you have a defined benefit pension plan, your plan administrator can be a great source of information, and should be able to show you how each benefit choice will affect you in terms of dollars and cents.
And if you have squirrelled away retirement savings, it would make sense to seek out an unbiased, fee-based financial planner to get some projections of how long your funds will last.
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