Chapter 10: Pension Decisions
The worksheets from Chapter 10 of Fifty-Five. Type your own numbers, or try an example from the book to see how each one works.
What the survivor option costs, and what it pays
The two sides of a survivor option: what it takes off your check, and what it leaves for your spouse.
The formula: Single-life payment − Joint payment = Monthly cost of the survivor option. Joint payment × Survivor's percentage = Survivor's monthly payment.
The calculator needs JavaScript. The paper worksheet below does not: it is the same arithmetic, written out.
The paper worksheet
Single-life payment $__________ − Joint payment $__________ = Monthly cost $__________
Joint payment $__________ × Survivor's percentage 0.______ = Survivor's monthly payment $__________
Walk through it, step by step
- Find the single-life amount in your pension packet. Write it on the first blank.
- Find the amount for the survivor option you're looking at. Write it on the second blank.
- Subtract. That's what the option costs each month. Multiply by 12 for a year.
- Write the survivor's percentage as a decimal: 50% is 0.50, 75% is 0.75, 100% is 1.00.
- Multiply the joint payment by that decimal. That's what your spouse would get each month after you die.
- Do it for each survivor option in the packet.
- Put the survivor's payment into the survivor's budget from Chapter 4.
Check your answer
- Divide what the option cost in total by the survivor's yearly payment. That's how long the survivor has to collect to get it back. For Rosa: $43,200 ÷ $30,000 = 1.44, about a year and a half.
- Some plans raise your payment back to the single-life amount if your spouse dies first. Ask whether yours does.
This worksheet uses only the numbers you type. It has no government figure built in.
A first look at a lump sum offer
The size of a lump sum next to the pension it would replace. It's a first look only. It leaves out growth, inflation, taxes, survivor options and how long you'll live.
The formula: Monthly pension × 12 = Yearly pension. Yearly pension ÷ Lump sum = Payout rate. Lump sum ÷ Yearly pension = Years the lump sum would last with no growth.
The calculator needs JavaScript. The paper worksheet below does not: it is the same arithmetic, written out.
The paper worksheet
Monthly pension $__________ × 12 = Yearly pension $__________
Yearly pension $__________ ÷ Lump sum $__________ = Payout rate 0.______
Lump sum $__________ ÷ Yearly pension $__________ = Years it would last ______
Walk through it, step by step
- Write the monthly pension you'd give up. Use the option you'd actually choose, such as joint and 100%.
- Multiply by 12.
- Divide the yearly pension by the lump sum. Move the decimal point two places to the right to read it as a percentage.
- Divide the lump sum by the yearly pension. That's how many years of pension payments the lump sum equals, if it earned nothing.
- Compare that number of years with how long you and your spouse might live (Chapter 22).
Check your answer
- Multiply the years by the yearly pension. You should get back the lump sum: 13.33 × $30,000 = about $400,000. It matches.
- Take both numbers to a tax professional or a fee-only planner before you decide. This worksheet doesn't make the decision.
This worksheet uses only the numbers you type. It has no government figure built in.
What a rollover adds to your RMD
The required withdrawal that a lump sum will create once it's in your IRA.
The formula: Rollover balance at your RMD age ÷ RMD factor = First-year RMD from that money
The calculator needs JavaScript. The paper worksheet below does not: it is the same arithmetic, written out.
The paper worksheet
Rollover balance at your RMD age $__________ ÷ Factor ______ = First-year RMD $__________
Walk through it, step by step
- Write the lump sum.
- If your RMDs are years away, grow it with the multiplier table in Chapter 3. If you'll draw on it before then, use what you expect to have left.
- Choose your factor: 26.5 at 73, 24.6 at 75.
- Divide.
- Add the result to the RMD row of your income map (Chapter 3), and check the total against the IRMAA lines.
Check your answer
- Multiply the RMD by the factor. You should get back the balance: $16,260 × 24.6 = $399,996, which is $400,000 after rounding. It matches.
Figures this worksheet uses, and where they come from: Uniform Lifetime Table factors: 26.5 at age 73 and 24.6 at age 75. RMDs start at 73 or 75. (IRS, Internal Revenue Bulletin 2024-33, T.D. 10001).