Q&A: Maximizing retirement benefits

Dear Liz: I don’t know where to turn. My husband is 76. He has a federal government pension and collects Social Security but he has only a $17,000 life insurance policy. We still have a $229,000 mortgage and no savings other than my small 401(k). I am 59 and also a federal worker. Do you have any suggestions or guidance for me? Is there such a thing as an insurance policy that could pay off the mortgage if he passes before me?

Answer: Buying a life insurance policy on your husband that would pay off your mortgage isn’t necessarily impossible, but it would be expensive and might not be the best use of your funds. You can explore that option, of course, but you also should research your own retirement resources and what’s likely to remain after he’s gone.

Will your husband’s pension make payments to his survivor or will it end when he dies? How much will your own federal pension pay you when you retire? How much will Social Security pay you, and how does that compare with your survivor’s benefit (which is essentially equal to what your husband is receiving when he dies)? What are your options for maximizing those benefits?

You also need to know if your Social Security benefits could be reduced because of your public pensions. Some federal employees and employees of state or local governments receive pensions based on earnings that were not subject to Social Security taxes. When that’s the case, their benefits could be reduced by the Windfall Elimination Provision or the Government Pension Offset. Most federal employees hired after 1983 are covered by Social Security, but just in case you should check out the information at http://www.ssa.gov/gpo-wep/.

Once you have an idea of your income as a widow, you can compare that with your expected expenses and see whether continuing to pay your mortgage will pose a burden. If that’s the case, you might consider downsizing now to a place you could afford to buy with cash or a much smaller mortgage. Reducing your expenses also could help you build up that 401(k), which will help provide you with a more comfortable retirement.

Establishing a relationship with a fee-only planner now will help you prepare for the future and give you someone to turn to for financial advice should you be left on your own.

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  1. My husband passed away last year . We have a mortgage of $280,00 left. I get only half of his pension from one job and another$1191 from another job + social Security of $ 1883. No life insurance. He told me his collection of guns and Knives+ other stuff would be more than enough to pay for the mortgage. But my problem is who do you sell such a collection if he did not have an inventory of said collection as to how much each item cost? Also my mortgage is more than $1200 a month and credi card bills more than $25000. By the time I add everything monthly expenses ot utilities etc. I only have about $350 left for groceries and nothing else.I do not go to movies, shop for clothes and other unnecessary things anymore.
    I am 75 y.o. and not able to find a job. Financial planner would cost me about $100-150. Pleas help me before I file for bankruptcy. Thank you Liz

    • Liz Weston says

      I’m so sorry for your loss. People often overvalue their own collections, but an appraiser who specializes in weapons should be able to give you an idea of what they’re worth. You’ll want an independent assessment before you start looking for dealers. This is exactly the type of property you might have to sell in a bankruptcy filing, so it’s important to know what you’ve got. Here’s a site with information on gun appraisals: http://weapons.about.com/od/buyingagun/a/Gun-Values.htm