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fsgmichigan.com 25 CHAPTER 4 PENSION PLANNING When to Include Your Spouse First and foremost, if you believe your spouse will have financial hardships if you pass before them you will want to consider including them. Secondly, if you expect your spouse to outlive you it may be a good idea to include them. Especially, if you are in poor health and/or have poor longevity in your family and they are in great health and/or have good longevity in their family. Outside of the above-mentioned considerations this decision is based on personal preference. Some cannot pass up the peace of mind of knowing that their spouse is taken care of and others cannot pass up the extra income. Either way I encourage you to strongly consider the factors we discussed before you make your decision. Pension Lump Sums - The basics A lump sum buyout is an offer from your employer of a one-time lump sum payment in lieu of monthly payments for your life (and your spouse's life if you select a spousal benefit option). There are many factors to consider when determining if a lump sum payout is right for you. Let's take a look at a few: Consideration #1 Life Expectancy (or joint life expectancy) – Life expectancy is extremely important when determining if a lump sum makes sense for you. The reason life expectancy is so important is because the longer you live, the more monthly payments you will receive. For example, let's say you are offered the choice of a guaranteed monthly payment of $3,000 or a one-time lump sum of $500k. If you pass away in 2 years you will have received only 24 monthly payments or $72,000. Monthly payments did not work out so well. On the other hand, if you live 30 years, you will have received $1,080,000 significantly more than the lump sum offered. "Some cannot pass up the peace of mind of knowing that their spouse is taken care of..."