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Subject:  Re: survivor pension option vs insurance Date:  7/1/2001  8:53 PM
Author:  MDGrabhorn Number:  111 of 345

Be careful when you ask for an opinion, you may get one.

Anyway, in response to your question, be VERY VERY careful forgoing the survivor benefit for your spouse with this strategy. The concept you are toying with was once referred to as "pension max" before regulators clamped down on it. If you want to research the negatives, look to some old Jane Bryant Quinn articles inre.

You should be aware, that this really is not your choice. Your spouse has the ultimate decision as she is the one who will be signing away rights to a survivor pension.

Insurability is always the issue with this concept. Not just in 10 years, but now. Are you insurable now, at the rate you have been quoted? Are the 10 year rates guaranteed not to increase? Does the insurance policy have a guaranteed conversion to a permanent policy, in case you are not insurable in 10 years? If so, at what rate, how much will it cost then?

Most pensions do not have a cost of living adjustment, but I guarantee you, insurance will cost more in 10 years.

You did not indicate your age, health or your spouse's age or health, but both of those factors are very important as well.

In short, if you are worrying now about whether this scheme will work, imagine what your stress will be in 3, 5, or 10 years, especially if your health gets worse. This is not a light decision to be made at the last minute. The lure of a $4000 more per year in income may be nice. However, once you deduct the insurance and adjust for taxes, how much are you really saving versus the risk?

For peace of mind and to eliminate unnecessary risk, take the survivor option.

Best of luck to you.

M Grabhorn, CFP

P.S. If you really think your spouse is going to die first, take out a term policy on her. It should be cheaper.

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