Oh fun! Math and a spreadsheet.
I would take Option 1 -- here's why:
Option 1: $1324 per month for life with 100% survivor benefit
Option 2: $2113 per month until 62 then $638 per month with 100% survivor benefit
Let's look at this from your point of view and your survivor's, ignoring whether you choose to spend it or save it.
When you reach age 74, you are better off to have taken Option 1. That year, your total pension income reaches $317,760 from Option 1 and $312,420 from Option 2 and the gap keeps increasing in favor of Option 1. Until then, Option 2 gave you more total income.
So if you plan to live past age 74, you are better off taking Option 1. If you plan to die an early death, take Option 2.
From your survivor's point of view though, we need more information. If you die before age 74 with Option 2, does the survivor's benefit stay at the amount it was when you died ($2113) or does it go down to $638 when you would have reached age 62 had you been alive? If the answer is that is decreases when you would have reached age 62, then by all means take Option 1. If it is frozen at $2113 though, that might make your survivor favor Option 2, and then stop feeding you your vegetables and encourage you to eat fried foods and watch TV.
