Three unrelated rules land on Ray’s 65th birthday. Colorado’s military pension exemption rises from $20,000 to $24,000, Medicare starts, and the pre-Medicare premium stops. None of the three knows the other two exist.
Worked example · computed live
What happens to me if he goes first?
Watch the model follow a pension election made seven years ago all the way through to what it means for Dee.
His pension, before and after
$3,400/mo
While Ray is alive
$1,700/mo
Continuing to Dee
Ray ticked 50% to protect Dee, and neither of them has ever been able to tell whether it was enough. It cannot be changed now. What can be settled is what it is worth — had he taken the higher single-life payment instead, Dee’s figure here would be zero.
Before and after
The largest decision in a retirement plan is often not an investment decision, and often was not recognised as a decision at the time. It was a box on a form, ticked in a week full of forms, years before anyone would feel it. Ray’s is worth more to Dee than every contribution and every rate of return in this plan put together. A calculator that starts from the portfolio will never show her that — it treats the pension as a given and models the part that moves. This one reads the plan terms first, then asks what is left for the portfolio to decide.
Dee & Ray Okonkwo
58 and 62, Colorado Springs, Colorado
Dee is 58 and still working in Colorado Springs. Ray is 62, retired from the Army, and has been drawing a pension with a cost-of-living adjustment since he was 55. Between them they have $150,000 saved — which is less than it sounds, because the pension is doing the work a portfolio would otherwise do.
What they have
- Taxable
- $25,000
- Tax-deferred
- $105,000
- Tax Advantage (Roth)
- $20,000
- Social Security at 67
- $2,100/mo + $2,600/mo
- Pension
- $3,400/mo, 50% survivor
- Still working
- $54,000
- Spending
- $5,400/mo
- Health cover before Medicare
- $1,050/mo
What they’re asking
Ray picked the 50% survivor option seven years ago. Was that the right call?
Does Colorado tax military retirement? We've been told both.
What actually happens to me if Ray goes first?
Because the largest number in their plan was decided seven years ago, by a form Ray filled in when he retired. Households like theirs are usually modelled as though the investing decisions matter most. Here they do not come close.
The report works through these in its own order. Every one of them is answered — the answers are gathered at the end.
Run the numbers.
The full report is below, computed in your browser from exactly the figures above. Nothing is withheld and nothing is a screenshot — the controls in it work, and moving one re-runs the whole projection.
Then the survivor view. Ray’s pension halves, because he elected 50% continuation. Dee also loses the smaller of their two Social Security cheques — that is automatic, and the pension election cannot protect her from it.
Household income falls by more than half. Household spending does not. That gap is the single most consequential number on their report, and it was set by a form, not by a portfolio.
You now know enough to know who to call
A CFP who handles military benefits
“Given the gap this shows, what is the cheapest way to close it — and does SBP still make sense alongside what we already hold?”
The election is irrevocable and it interacts with life insurance and with Dee’s own benefit. We can show you the size of the gap. We cannot price the ways to close it.
Their questions, answered
What the report told them
Every figure below comes from the report above — nothing here is worked out separately, and each answer links to the stop that shows how it was reached.
“Ray picked the 50% survivor option seven years ago. Was that the right call?”
This report will not tell you whether it was right, and no model should — that is a judgement about two lives, not a calculation. What it can tell you is what the election is worth. Ray’s $3,400 pension continues to Dee at $1,700 a month for the rest of her life, cost-of-living increases intact. Had he taken the higher single-life payment instead, that line would be zero. Every figure in this report assumes the 50% he chose.
“Does Colorado tax military retirement? We've been told both.”
Partly — which is why you have been told both. Colorado exempts $24,000 a year of military retirement from age 65, and $20,000 before that, then taxes the rest at 4.4%. Ray’s pension is $40,800 a year, so tax falls on $16,800 of it: about $62 a month. Without the exemption it would be nearer $150. The exemption steps up on his 65th birthday, the same year his Medicare begins.
“What actually happens to me if Ray goes first?”
Household income falls from $8,100 a month to $4,300. The pension halves to $1,700, and Dee keeps the larger of the two Social Security benefits rather than both. Spending falls too, but only from about $6,150 to $5,950 — roughly 3%. Income down 47%, outgoings down 3%: that gap is the whole of the survivor question. The plan still holds, with 290 of 300 paths reaching 100, because a cost-of-living pension is doing the heavy lifting. Delaying Ray’s own claim to 70 would raise the benefit Dee inherits, which is the comparison set out on the Choices page.
What we could not tell them
Whether 50% was the right election at the time. That question is closed — it cannot be changed now — so the useful version is what to do about the gap it leaves, which is a conversation with a person.
Your turn
The biggest number in their plan was set by a form, not a portfolio. Find out what your own plan terms are quietly deciding.
Or read another household — all six are here. Each one reaches a different limit.