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I'm a bit confused. Usually, once you select the survivorship option at retirement, it is fixed. It sounds like CalSTRS is allowing a one time retroactive change...something I've never heard of. But assuming they are, will they require that you (or your husband) repay the excess pension payments you (he) recieved with the 50% survivorship option?

And funding a survivorship with a cash-value life policy is potentially a good alternative, as Governments sometimes aren't the most efficient money managers and may charge excessively for a survivorship (as is the case with the Federal Survivor Benefit Plan...or at least it was when I retired from the military in 1999). And sure, depending on your health, you can buy cash-value insurance at any age, although premiums will grow exponentially with increasing age. But this is an alternative I would explore.

But to definitively answer your question, you'll need to do a household cash-flow analysis of the fixed, non-discretionary costs that a survivor would have were the spouse to die first, and then take the option that will best meet this. Make sure to grow these expensees over time, with higher inflation used in medical expenses.

An idea might be to take your numbers to a local Fee-Only CPA or CFP, and have them double check them and help advise you. It'll cost you a few hundred bucks (like taking your car in for a repair), but may well be worth it.

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