Well, I’m not an advisor, but I just went through all the options with annuities, and it’s not true it’s “gone” when you pass - depending on the option. You can choose something like “cash refund” or “period certain for 20 years” that means if you die before you draw out your initial refund the balance will be refunded to your heirs, or if you die before 20 years, your heirs receive payments through year 20.Here is what is causing my wife and I angst as we research and plan out a transition from work to retirement.
Currently my wife and I will have 6 defined benefits revenue streams where we will pretty comfortable in retirement. Able to meet all bills with enough left over to fund a couple of pretty significant trips a year. My 3 streams will bring in about 2/3rds and her's about 1/3rd.
If something happens to her, all 3 of her revenue streams go away leaving me with the 2/3rds share. Which being single will be fine.
If something happens to me, then she ends up with pretty close to the 2/3rds mark herself. That results from:
So either one of us alone will have roughly the same amounts. And honestly we would be fine either as a couple or as a widow(er). Which is really good.
- Her Social Security being raised to my level.
- I have an active Survivor Benefit option on my military retirement. So if I pass she will receive 55% of my military retirement for the rest of her life.
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So then if we add our 401K's into the mix.
Taking an annuities adds,. this 2 more revenue streams (total of 8 now) since 401K's are an individual account, not joint. If we take annuities and opt for the survivor option, the monthly amount will be a little lower, but if something happens to the other then the surviving spouse has that income for the rest of their life.
The other option is to not take an annuity, roll it out of the employer sponsored 401K and into a qualifying IRA investment account. That gives us direct control of the funds and we can withdraw as needed. (If at all until we reach RMD age.)
So here is the cause for the angst:
So the gamble is security for us for as long as we live, or if we were to pass being able to pass something to the kids.
- As we understand it, if we take the annuities, that is the safest income stream(s) for us. However once we pass, that's it. There is nothing to pass to the kids. If we pass in 10 years, it's gone. If we pass in 35 years it's gone. That's what an annuity is. The gambling is done by the annuity provider.
- On the other hand if we roll the money into an IRA investment, we can draw as needed. Even accounting for eventually having to take RMDs. Once we pass though, any remaining balance then becomes part of the estate and can pass to our children.
WW