April 18, 2013 (PLANSPONSOR.com) - Most men plan for their own life expectancy without taking into account the likely chance their spouses will outlive them, a retirement specialist cautions.
“We don’t think this is a premeditated evil,” James Poe, chairman and founder of Texas Retirement Specialists, told PLANSPONSOR. “Men just don’t have a woman’s perspective.”
Men make several mistakes when planning for a retirement in which they will statistically die before their wives. The first is taking Social Security too early, which can mean forfeiting potentially hundreds of thousands of dollars, he said. Instead, the man should consider taking his benefits at age 70 because it provides the highest benefit to the person who will likely live the longest—the wife.
Research from Morningstar shows that spousal survivor benefits significantly increase the potential benefit from delayed claiming ages. For example, if both spouses are the same age and the primary spouse takes benefits early, then dies, the surviving spouse would have to earn 9.3% or higher on the invested benefits throughout retirement to be better off than if the primary spouse had delayed benefits (see “Paper Reveals Benefits of Delaying Social Security”).
In Poe’s experience, the majority of men who retire with a pension take the single life option (i.e., nothing to the survivor). The single life option pays the most current income, he explained, because the insurance company paying the monthly benefit knows how long the beneficiary is likely to live.