We were at a dinner tonight, and we happen to be discussing some folks looking at retiring, and the subject came up of Social Security.
A question was presented related to Beneficiary....
It looks like the SSA payouts can only go to a spouse or children (till 18). So - thinking about some of our DINC friends, what about them - flaming car crash - what happens to their SSA ? Since it's not like a regular investment with a defined beneficiary slot, it would appear there is nothing these DINC can do...
Do? About what? If they are both dead, they have no use for the money. I worked for a company with a defined benefit pension plan. When they decided to stop funding the plan, there were two choices, (a) at retirement, receive the built up value, which of course was less than if the plan were funded all that time, or (b) take the present value, in the form (preferably) of a transfer into a 401(k) or IRA account.
What many of my coworkers failed to understand was the difference in value of a cash stream (the pension) with no principal behind it. By that I mean, the pension acted as an immediate annuity, a monthly payment till death. For a 25% lesser payment, it included the spouse's lifetime should the worker die first.
The IRA option was preferable to me as I was left with the choice of how to invest it and should I die, I could designate my beneficiaries as I wish.
This long-winded answer is to illustrate that Social Security is analogous to that immediate annuity with a bit of inflation protection, It's not a lump sum you can leave to the 18+ year old kids or to charity.
Basically correct. SSA is not like life insurance, IRAs, CDs, etc. Only spouses and/or children are eligible for Survivors benefits. In addition, if a surviving spouse is already collecting more $$ than deceased spouse, the lower benefit just goes away. Happened to my father (91) when my step-mother (87) passed. Her benefit just stopped.
I was trying to show that it reflects an immediate annuity. Once you think of it that way, you're not looking for a residual value you can will to anyone.
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