What is Pension Maximization?

When a married employee is retiring with a pension or 401k, they have options as to how they will receive their money. The following is an example:

 

(Monthly Figure

                                             Retiree    Income  Survivor                                  

                                                                

1. Single Life                        $4000                        None

                                                 

2. 100% Survivor                  $3200                       $3200

 

                                                 

The Pension Trap

Most retirees choose number 2: the reduced income "Survivor" Option ($3200/month).



If they die first, pension income continues to their spouse.



The $800 a month they forfeit is essentially a life insurance premium paid to
the retirement fund.



This form of life insurance can be costly and gives the retiree less control
over their survivor benefit.

 

* More income for both lives.

 * If retiree dies first, the spouse pays less income tax.

 * If spouse dies first, the retiree can change the beneficiary without a recalculation in income or the retiree can surrender the life insurance policy and receive any money accumulated in it.

 * If both retiree and spouse die about the same time, they can pass on insurance policy benefit to estate or charity.

 * Access reserve cash fund for emergencies.

 

 

 

Pension Maximization Strategy- An Alternative Way to Provide Survivor Income
  
 As an alternative to the survivor option, the retiree could choose number 1:
the maximum income "Single Life" Option ($4,000/month). Then with a
portion of the savings ($800/month), they purchase a life insurance policy for
their survivor.



 

Click here to learn more about the 5 scenarios that can happen in
retirement.