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Pension max or reduced benifit


I am retiring this year (I am a healthy 44) and can select an option from my pension to provide for a beneficiary (my wife who is also a healthy 44), if I choose. Both of our parents are alive and we have no children. My annual pension is a defined benefit that can vary from $73,000 to $81,500 depending on which option I choose below:
• $6,794 per month Max benefit (100% benefit for my life, no benificiary)
• $6,661 per month 25% to surviving beneficiary for her life
• $6,428 per month 50% to surviving beneficiary
• $6,259 per month 75% to surviving beneficiary
• $6,100 per month 100% to surviving beneficiary
Here is some more information to help decide on whether to take a decreased benefit and supplement with term life insurance (paid for with post tax dollars).

My monthly benefit has a 3% COLA which makes both the benefit and or the potential savings worth more.

The DROP (Deferred retirement option plan) allows me to continue working for up to 8 years while my pension benefit is deposited into an account monthly. This account has an 8% guaranteed return. Max benefit - (8 years X 81,500 = 652,000) X 8% annual compounded interest and the 3 % annual COLA applied to the benefit.

There is no relation to beneficiary health coverage tied in to the decision.

I had my physical and am pre qualified for up to 2 million dollars 30 year term @ an annual cost of $4,200 and up to a 1 million 10 year term @ an annual cost of $800 (to cover the DROP listed above). To be safe, I got approved for what I thought would be the absolute max needed. I got prices in 250,000 increments both policies..

Our life expectancy is 84, 10 years beyond the 30 year term policy.

My thinking is that a combination would be best. The life insurance is tax free, immediate and would cover the lost DROP if I passed sooner rather than later. By the time the 30 year policy expires, the DROP account and the savings should equate to a considerable amount. She would get a fixed amount with a COLA and not have to worry about investments

By reducing my benefit she gets a guaranteed monthly payment with a COLA, a larger DROP account with compounding interest of 8% and all that we save or accumulate for all the years receiving the larger benefit and the life insurance can be transferred or cancelled if she passes before I do.

My concerns are the Life ins. Companies stability. They are all A+ rated and I would split the coverage equally between them. Also my concern is the premium changing or some other small print loophole, or simply missing a payment.

Thanks in advance for any help
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