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Social Security gives a monthly allotment to surviving children of a dead parent.
When my husband & I were in college, he was receiving $190 per month from Social Security because his dad had died.
This seems funny now, but the $190 per month was almost in the windfall category in 1969 thru 1975 when we were in college and in graduate school!
That $190 per month carried us really far and was a huge part of our existence. It was actually considered quite a bit of money by us. And $190 went pretty far in those days.
Last edited by matisse12; 05-05-2016 at 02:27 PM..
Don't count on those COLAs. My state decided PERS was too expensive and capped COLAs at 2%. That's OK right now, but the next round of high inflation will be really painful.
The catch here is that you have to elect that lifetime survivors benefit within 45 days of your initial hire date- after that it generally can't be changed (outside of something like divorce, etc). The payout is also lower overall if you designate a lifetime beneficiary, rather than a one time death benefit. So if you decided 5 years from retirement that it would have been a nice option to have- no bueno. Many people don't bother reading the fine print and stick with the default options.
So it seems her mother may have been fairly forward thinking, but that's about it.
Making that election was part of the retirement process for us. Who requires you to make an election of that nature when you might be 45 years from retirement? That makes absolutely no sense at all.
All this has changed I think. Back when these deals were made between politicians and public union representatives (the unholy duo of fiscal irresponsibility) they, particularly policiticans, never cared about the future. Why should they? Bills would become due long after they left office.
I don't disagree in general, though I think it's a bit bigger than that.
In any case, this is not unique to public government. Any number of private companies did the same thing, it's just easier for them to get out of pension obligations with bankruptcy restructuring or outright closure. In which case the worker's only hope is to collect off public insurance (the PBGC, I think?).
Either way, private companies can make promises about future benefits just as well as government can without being held to the fire to actually fund them either in the present, or when the obligation comes due.
Courts have in many cases prevented municipalities from reneging on public pension obligations or otherwise restructuring (see: Oregon PERS) and while Detroit can be put on emergency management, it doesn't stop being Detroit.
So the proper funding of defined benefit plans is a problem almost anywhere, it's just more visible in the public sector because it fits a narrative, and it's very hard for government to skip out on the bill, even if the legislators who made the bad decisions are long gone.
Although we're talking a small amount of money in my ex's case, a five figure pension per month is truly mind-boggling.
10,000 monthly public pensions are still pretty rare -- but they do exist, especially in high COL states like NY/NJ/CT and California. However, many of these states are looking at ways to cap pension payments or otherwise reduce their liability for the highest earners.
This annuity of your ex sounds like it may be subsidized by the Tennessee public employees retirement system. Annuities generally run for the lifetime of the annuitant and the annuitant's age-equivalent beneficiary (usually a spouse). Your ex was lucky that her mother selected her and that the state has no age limit provision on a beneficiary.
It's sometimes surprising how much you profit from an annuity (although they are not usually recommended investments). My mother worked for a few years in the 1980s administrating a Lutheran nursing home, also participating in their annuity fund retirement plan. Her contributions were less than 20k total. When we sons shifted her into a retirement profile 10 years ago, we annuitized these funds, and she has been getting $600 per month ever since. She may end up collecting something like 30 years on this annuity, or north of $200,000 in (taxable) benefits.
The $500/month/$47,000 lump sum is not much. Best I know, it was the majority of her mother's retirement. I have no idea how much she made, but at that benefit level, couldn't have been much. She was a single mom, and I know they've always been hard up for money. It wasn't like she was going to live a life of luxury on that.
What I'm confused about is the benefit to my ex. I can see the benefit going to a surviving spouse or a dependent child until 18. I could also see being able to obtain whatever the retiree contributed to another party. I simply don't understand how the math works out by giving a young, surviving beneficiary $500/month for fifty or sixty years. There were no other surviving blood relatives on that side of her family, and her mother was single. Ex got the benefit basically by default
TCRS is one of the more solvent pension systems in the country. I wouldn't be worried about it going belly up.
Quote:
Originally Posted by westender
This annuity of your ex sounds like it may be subsidized by the Tennessee public employees retirement system. Annuities generally run for the lifetime of the annuitant and the annuitant's age-equivalent beneficiary (usually a spouse). Your ex was lucky that her mother selected her and that the state has no age limit provision on a beneficiary.
It's sometimes surprising how much you profit from an annuity (although they are not usually recommended investments). My mother worked for a few years in the 1980s administrating a Lutheran nursing home, also participating in their annuity fund retirement plan. Her contributions were less than 20k total. When we sons shifted her into a retirement profile 10 years ago, we annuitized these funds, and she has been getting $600 per month ever since. She may end up collecting something like 30 years on this annuity, or north of $200,000 in (taxable) benefits.
I would say the ratio for the ex is going to be even more lopsided than this. Quite amusing really.
Most states have fairly generous pensions. If the mother had retired with +30 years, she would have received perhaps $21-25K for the next 30 or 40 years assuming a final salary of $35K. And probably with COLA. Her daughter is receiving only $6K for 60 years or more. So the daughter's death benefit does not seem that great to me. However, like others I am surprised that an adult daughter can receive death benefits. In the federal government, only the spouse, ex-spouse in the case of a court order, minor child, child less than 22 in college, or a child disabled before the age of 18 can receive death benefits.
I also don't know if an insurable interest means that your child or sibling was diagnosed with a severe mental illness or disabled after age 18 and you are supporting or partially supporting them? Or does it just mean that they don't have a job, or are high functioning autism and have difficulty holding a job, or have a low wage job and a few kids and are living with you permanently? It would be interesting to know how flexible OPM is in their interpretation of insurable interest.
Most states have fairly generous pensions. If the mother had retired with +30 years, she would have received perhaps $21-25K for the next 30 or 40 years assuming a final salary of $35K. And probably with COLA. Her daughter is receiving only $6K for 60 years or more. So the daughter's death benefit does not seem that great to me. However, like others I am surprised that an adult daughter can receive death benefits. In the federal government, only the spouse, ex-spouse in the case of a court order, minor child, child less than 22 in college, or a child disabled before the age of 18 can receive death benefits.
I also don't know if an insurable interest means that your child or sibling was diagnosed with a severe mental illness or disabled after age 18 and you are supporting or partially supporting them? Or does it just mean that they don't have a job, or are high functioning autism and have difficulty holding a job, or have a low wage job and a few kids and are living with you permanently? It would be interesting to know how flexible OPM is in their interpretation of insurable interest.
She was living with her mother until her death, had some student loans, and couldn't afford to move out on her own at minimum wage. No idea if this would pass the federal government's smell test, but it is an interesting mental exercise.
Usually a survivor gets 50% of the retiree's annuity but I don't know if it is 50% of the full amount or the reduced amount.
I am a Federal Government employee and although a few years from retirement have already had my retirement calculations done by my assigned retirement person. At retirement a Fed employee has the option to choose a 100%, 50%, or a 25% survivor benefit. If I elect a 100% survivor benefit in my case for my spouse who is 5 years older than when I plan to retire at age 66, for him to receive my full monthly benefit projected to be around $2300 I will need to have deducted around $400 a month until my death, or if he passes first until his.
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