Retiring Soon?
When you retire you typicall meet with a pension administrator to
review the various income options available.
These options, of course, are based in large
part on years of service and annual income
during the years preceding retirement.
But there is a second variable that is often
overlooked by retirees: the survivor's benefit.
Simply put, the survivor's benefit guarantees
that retirement income will continue
even if the retiree dies first. In other words,
in order to protect a spouse against a catastrophic
loss of income that would occur if
the retiree died first, the pension is often
arranged so that payments continue for the
longer of the two lives. Thus the spouse continues
to receive a pension income, even if
he or she outlives the retiring Member. This
is a very important benefit.
But it comes at a cost. If the pension is taken
in a "single life expectancy," the monthly
income will likely be hundreds of dollars
more than if the pension is distributed
through "joint life expectancy." The logic
here is simple: a joint life pension will, in all
likelihood, pay out over a longer period of
time than a single life pension. Thus the
monthly income is significantly reduced.
The Advantages of Pension Maximization
Pension maximization is not only viable; many couples actually prefer it over the spousal benefit for reasons other than pure mathematics. Why?
- A life insurance benefit is 100% tax-free, while pension income is subject to income tax. (Remember this when comparing the two. For example, if you have a $100,000 pension spousal benefit and a $100,000 life insurance death benefit side by side, the pension payout becomes more like $70,000 after taxes, while the life insurance payout holds at $100,000.)
- A life insurance death benefit is paid as a lump sum. The only way to get a lump sum with a pension is to accept a greatly reduced payout.
- Money from life insurance is generational. A pension with a spousal benefit is void after the spouse dies.
- You have more leniency to adjust or cancel your life insurance coverage if your needs change. There is no going back on your pension decision.
Pension Maximixation Life Insurance Learn all the detail to execute a plan for perfect for your situation by using the experts!
hould you choose Pension Life Insurance?
Pension maximization using life insurance compared to the survivor benefit should be considered based on your specific pension plan and your unique circumstances. Here are few
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