Question: How should I take my defined pension?

Pensions file

I am retiring on January 1. I have to select how I want my defined pension amount monthly. One option is to have the same amount paid no matter if my wife or I die first. The amount will always stay the same until we both die. The second option is to receive higher amount until one of us die. After that, the amount goes down by one third. The second option would give me about $6,000 more annually, but about $22,000 less when one of us dies. I am thinking about doing the first option to keep pension constant for both of us. Any suggestions?

Response:

I like the option where the monthly pension payment remains the same until you’re both dead. The price tag with this option is that the monthly payout is less because it covers both your life and your wife’s life. However, with this option if die before your wife (the actuarial odds) she doesn’t suffer a dip in income, and vice versa.

That said, I want to emphasize the other options are sometimes better if the spouse has her own defined benefit pension or other assets to draw on during retirement. You still have to ruin the total household numbers. But, as a general rule, I think the 100 percent joint-and-survivor annuity choice is the fairest and best for many couples.  

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