Jetjok

As some of you have learned, I’ve recently left my LTD status for retirement. Good you say. Me too. The process of retirement is not so much a complicated one, as a lengthy one. One filled with lots of phone calls to various people and departments, to make sure that all goes well, and that all your ducks are in the proverbial row, so that you can start to receive your pension checks and other “retirement benefits” in a timely manner.

The most complicated issue for me, was whether to elect a Straight Life Annuity (SLA), which would have maximized my total monthly paycheck, or to have selected one of the joint surviving spousal options, either the 50%, the 75%, or the 100% option. The SLA pays the most, but if you die, your spouse gets nothing, and in fact, your spouse must sign a notarized document, acknowledging the fact that they understand that you are selecting the SLA.

Selecting any of the surviving spouse options would have lowered my monthly check, but if I were to die before my wife, she would get 50%, 75% or 100% of my monthly check, for the rest of her life, depending on what option I had selected. Whatever option you select, is permanent, and is non-changeable, so a good deal of thought should go into your decision, based on your age, health, financial situation, how much you love your spouse, etc, etc.

With the above in mind, I started to look at life insurance as an alternative to selecting any of the surviving spousal options, with the idea being to provide my wife, in case of my death, a lump sum, tax free pot of money, with which to do whatever she felt like doing. In my case, considering my health history of cancer and heart issues, I found that neither normal life insurance companies, nor those set up to insure “at risk” people, like myself, would insure me. That left converting the group life insurance I had with FedEx into an individual life insurance policy. The reason this could be done is that no medical questions or history are required, and more importantly, no physical is required. Of course the downside to this type of conversion is that the cost of the policy can be through the roof, for just the above stated reasons, ie no medical history, high-risk, etc.

It was at this point that I learned a lot. The group policy that FedEx was providing me had a face value of $400,000, but when I turned 65, they reduced it by roughly 20%, so that what they showed was a value of roughly $330,000. The folks at FedEx Pilot Benefits were fantastic, and they acted on my behalf to get me a quote from Lincoln National Life Insurance Company, the underwriters of the policy. When I got the quote I almost gagged. The premium was very close to $24,000 per year. Undo-able! The conversion would be to a Universal Life policy, so the premiums would stay the same, and I’d be covered until my 121st birthday, at which time the policy would lapse. I called Lincoln directly and asked if there was any other type of policy which I could convert to. Their answer was NO! That was the only policy type that they would convert to. Who lives to 121?

Here’s where it got interesting, because I got a friend of mine involved, who happened to own a business which provides high-risk clients with life insurance. He doesn’t underwrite the insurance, but works with many insurance companies who would write this type of business. He got in touch with Lincoln, and somehow managed to find out that the reason my conversion was going to be so expensive was that Lincoln was illustrating a policy with both an Endowment Rider and a policy which would accrue cash value. Neither were options I wanted. He put me in touch with a woman who told me that Lincoln could write the conversion the way I wanted, and to top that off, she immediately emailed me an illustration which showed the same face amount as the previous policy, but the cost had dropped to under $10,000, a reduction of over $14,000 per year (to age 91.) Fantastic.

However, I couldn’t even start the procedure of applying for the conversion until I was retired. So last Monday, two days after my retirement date, I called the good folks in pilot benefits and asked them to tell Lincoln I wanted to convert to an individual policy. The illustration arrived yesterday and low and behold, it was for exactly the same policy that they initially quoted, the one costing over $24K. However, one good thing was that the face value of the policy was not the $330K I had expected, but the full $400K of the original group policy. I got on the phone with the woman who had given me the information I wanted, and she said to just fill out the Request for Conversion and other paperwork Lincoln had sent me, but include her illustration, along with a check for the first two months premiums and I’d be good to go. The stuff went out FedEx overnight this morning.

The lesson I learned here was to not believe everything I see, read, or hear, but to be persistent and find the answer that fits your needs. I know for most of you, this post has no value, but perhaps there’s a few guys out there that are going through the same thing, and this might be of help.

So in conclusion, I’m taking the Straight Life Annuity and paying for the Universal Life Insurance policy with monies that I wouldn’t have had if I had selected one of the joint survivor options. This way, if my wife dies first, and I don’t want to leave the insurance to the kid, I can cancel the policy. If I’d selected one of the joint survivor options and my wife died two weeks later, I’d be stuck with the reduced pension amount forever. The insurance payout is tax-free, whereas the monthly checks my wife would have gotten, had I selected a spousal annuity would have been taxable, and if she had died shortly after I did, most probably because she no longer had me to drive nuts, all payments would have stopped and nothing would have been going to my kid or my heirs. Peace.

JJ