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Modeling Pre-retirement Death of a Spouse?

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Last Post by DebiT 3 years ago

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Steve Laufer

(@slaufer)

Trusted Member Customer

Joined: 5 years ago

Posts: 35

Topic starter March 2, 2023 12:29 pm

Unlike in the retirement phase, when you have the death of a pre-retired spouse, many of the income model elements change. Has there been any thought about ways to easily change the values in the income?

This includes:

- Change of SS to Survivor Benefit (prior to surviving spouse taking their own) and deferred while working

- Change of HSA, Family >> to single/HoH/Widow; change in contribution amount; company allocation; qualifying period

- May include payment of HSA by passing spouse in final year

- other pre-retirement changes: income, taxation (MFJ >> S/HoH) year after passing; and pension changes (prior)

Thank you

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pre-retirement death before spouse

Stuart Matthews

(@smatthews51)

Member Admin

Joined: 6 years ago

Posts: 618

March 2, 2023 5:17 pm

Steve,

Some of this works today, such as termination of income streams associated with a deceased spouse and changing of filing status to Single or HoH (if there are dependent children) after the death of a spouse. We're beginning to think about future enhancements that can alter pension income amounts and possibly SS benefits amounts if the owner dies prematurely, but those won't be available prior to 2024 or even later. If you have specific suggestions in this area, we'd love to hear about them and request that you post them in the Wish List sub-forum.

Stuart

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DebiT

(@debit)

Eminent Member Customer

Joined: 3 years ago

Posts: 15

October 29, 2023 3:36 pm

@smatthews51 I just now purchased Pralana Gold, having seen it talked about on the Boglehead's Retiree Portfolio Manager forum, and elsewhere. I am a recent widow age 66, won't be collecting my own SS until age 70, and am currently collecting as a survivor. It looks like my workaround is to enter my current SS survivor benefit as a pension, which would end mid-year 2027, and then enter my own SS benefit as beginning age 70. Am I correct? There will be 6 mos of "excess income" in that case, where Pralana thinks I still have my fake pension income through 2027, even though it will stop mid-year. Thanks for any suggestions.

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Stuart Matthews

(@smatthews51)

Member Admin

Joined: 6 years ago

Posts: 618

October 30, 2023 6:40 am

@debit Yes, that's a good workaround and you can eliminate the excess income by stopping the fake pension either on a specific date or at age 70 (PRC's income streams can all be started or stopped via several methods). Since it knows your birthday, it will stop the pension on the day you turn 70 if you enter "70" in the Stop field.

Stuart

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Steve Laufer

(@slaufer)

Trusted Member Customer

Joined: 5 years ago

Posts: 35

Topic starter October 30, 2023 7:45 am

@smatthews51 Hello.When we use this workaround method, does Pralana correctly handle the taxation issues regarding the SS Survivor Benefit, given it is coded as 'pension'?

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Stuart Matthews

(@smatthews51)

Member Admin

Joined: 6 years ago

Posts: 618

October 30, 2023 7:50 am

@slaufer No; you'd probably need to adjust the fake pension amount to account for the fact that it's fully taxed by PRC. With that said, I think I've confirmed that a workaround actually isn't required to model the case initially described by @debit. I set up the model with a married couple, both age 66, each having their own SS benefit. The husband's benefit had already started and the wife's benefit set to start at age 70. The life expectancy of the husband was set equal to his current age; in other words, he was modeled to die on Day 1 of the modeling period. Then I went and checked how this was modeled and it was correct (I think) and taxes were handled correctly: the husband's SS benefits began in the first year of the modeling period and were treated as survivor benefits. That benefit was replaced by the wife's higher benefit when it began at age 70.

Stuart

This post was modified 3 years ago by Stuart Matthews

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Stuart Matthews

(@smatthews51)

Member Admin

Joined: 6 years ago

Posts: 618

October 30, 2023 8:28 am

Please note my other response that indicates a workaround may not be necessary. Just include your spouse in the model but set his life expectancy to his current age so that he dies on Day 1 of the modeling period. That enables his SS survivor benefits.

Stuart

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Steve Laufer

(@slaufer)

Trusted Member Customer

Joined: 5 years ago

Posts: 35

Topic starter October 31, 2023 8:25 am

@smatthews51 Thank you. In my case, it is a little more complex as the passing spouse was not yet eligible for SS benefits and the surviving spouse is still employed, over the 'claw back' levels. The target for obtaining the SS survivor benefits is upon retirement of the surviving spouse, est. 3 years from now.

Any ideas on how to implement this or should I wait for a future enhancement?

I think I can use the 'fake pension' benefit, then modify for the tax implications.

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Stuart Matthews

(@smatthews51)

Member Admin

Joined: 6 years ago

Posts: 618

November 1, 2023 2:39 pm

@slaufer I really don't have any better ideas than the fake pension or one of the Other Income streams, adjusted a bit to account for the tax implications.

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DebiT

(@debit)

Eminent Member Customer

Joined: 3 years ago

Posts: 15

November 7, 2023 9:19 pm

I just saw your response, tried it, and it worked. Thank you! I must admit it felt strange to add him, especially with an age that he never reached. I just now posted on the issues page that I'm not able to see the effects of inflation on my SS payments, nor on my expenses, even if I use future $ as a toggle. Hoping to get help with that as well.

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