[GAHERN]

I'm trying to determine a retirement option: take single life pmt of $7210 with nothing to spouse when I die, or $6467 with spouse getting 100% if I predecease her. Any year I predecease her means we lose the monthly $7210 income stream (or $86520 per year) from that point forward. I have calculated the NPV of the income stream in annual dollars from 55-85 and every 5 years thereafter to determine the dollar amount spouse will lose if I predecease her. I could buy life insurance to cover that amount and she's then taken care of.

Does this approach make sense? Has anyone calculated it differently? Thanks for you input.

g.

[ebaines]

I think that if you take the higher amount and still want to cover your spouse, then on day 1 of retirement you would buy a term life insurance policy so that in case you die at age 65 your wife could then buy an annuity that would pay $6467/month. To do this you would need approximately $1M in life insurance, assuming your spouse is age 65 (I used the Fidelity web site to get a quote for an annuity using these figures). Assuming you make it to age 70, at that point you would need "only" a $950K life insurance policy. As time progresses you need a smaller policy, BUT your premiums are going to sky-rocket. Not sure if at age 65 you could buy a $1M policy for the difference between $7210 and $6467/mo. Am I capturing your thought process properly?

Keep in mind that insurance companies make money by playing the averages, but that you and your wife as individuals can not plan everything on having a precisely average life expectancy. You need to make sure your wife is not left destitute if you were to be hit by a bus in day 1 of retirement.