Winter 2012 | Volume 110 | Number 662
Handled With Care
Photo Credit: Ben Van Hook
Comfortably Ever After
A couple plans ahead for the loss of a pension.
by Joe Bousquin
Bill and Nelda Schrader, who were happily married for 56 years, traveled every opportunity they got during their lives together. During summer vacations from Bill's job as a lab technician, the couple packed up their two kids and camper for far-flung adventures. They continued their traveling ways after Bill retired in 1984, spending winters in Nokomis, Florida, and summers near their hometown of St. Anne, Illinois.
The Issue: After retiring, Bill received a comfortable pension, which allowed the couple to continue enjoying the trips they loved. But the two knew they needed to plan for the inevitable: Bill's pension would end upon his death, raising the possibility that Nelda could face an uncertain financial future – alone – if they didn't act.
The Schraders turned to Thrivent Financial representative Timothy Byrne, who is licensed to sell insurance and with whom they had met regularly to discuss their financial options and retirement strategies. "You never really want to think about it, but we just wanted to make sure we had enough money to last us our lifetime," Nelda says. "Tim was really good at suggesting things suited to our needs."
The couple had long ago purchased individual life insurance on Bill to close the financial gap that would be created by the loss of Bill's pension upon his death. But they also wanted to make sure there were assets left over that could pass on to their children, preferably without a huge tax bill.
To help achieve that goal, Byrne suggested survivorship life insurance. Also known as a "second-to-die" contract, it covers both spouses and pays out only upon the second death. The life insurance proceeds, which generally are income tax-free to beneficiaries, can provide funds to help pay estate taxes, final medical expenses, funeral costs and other expenses.
"It's important to ensure that the surviving spouse has sufficient income and, if possible, set their finances up so they can pass something on to their heirs in a tax-favorable way," Byrne says. "In those instances, a second-to-die contract can be helpful."
The Outcome: Bill died in 2010 at age 82, but thanks to Bill's individual life insurance and their investments, Nelda has been able to continue enjoying her lifestyle, visiting with her children and grandchildren. She still spends her summers in Illinois and winters in Florida. As she looks ahead, she also knows the second-to-die contract is in place to leave an inheritance for her family.
She also still works with Byrne to adjust her financial strategies. "Even after Bill passed," Nelda says, "Tim's been there for me."
The experience of Nelda Schrader may not be representative of the experience of other clients. Her story is also not indicative of future performance or success.