Pension Maximization Life Insurance

If your pension payments are taken in a “single life expectancy,” the monthly income will likely be hundreds or even thousands of dollars more than if the pension is distributed through “joint life expectancy”. 

A joint life pension will usually pay out over a longer period of time compared to a single life pension. So, the pension payments will continue to the surviving spouse  even after the pensioner died. This is why the monthly income is reduced.

But the spousal benefit comes at a significant cost!

So, the decision to reduce one’s monthly income, in order to protect a surviving spouse, is actually similar to indirectly purchasing a very expensive life insurance policy.

What is Pension Maximization Life Insurance?

The decision to select a joint life pension should always be measured against the possibility of actually buying a pension life insurance policy on your own from a competitive life insurance company.

This way a significant cash death benefit will be paid to your spouse tax free, instead of a continued taxable retirement pension income.

This strategy is commonly referred to as pension max, pension maximization using life insurance, and pension life insurance.

A pension maximization strategy using life insurance is often utilized by married couples looking  to increase their net retirement income, while still protecting the surviving spouse’s income in the event the retiree dies first.

• First, the retiree elects the bigger single life pension instead of the smaller payout with a survivor benefit for their spouse. Retirees choosing a single-life benefit will dramatically increase their income during their retirement years.
• Retirees concerned about providing for their spouse can still choose a single-life payout, but also purchase a life insurance policy on the retiree’s life to provide for their spouse.
• If the retiree dies the death benefit is paid as a lump sum and is tax-free, while pension income is typically paid out monthly and subject to income tax.
• If the retiree’s spouse does die first, you can then either discontinue the insurance policy or name a new beneficiary and continue to pay the premiums.
• Depending on the life span of the surviving spouse and amount of death benefit chosen there still may be money left over for your children. If you and your spouse select a joint and survivor annuity, no benefits from your pension plan will be paid to your children when the surviving spouse finally dies.

It is important to select the proper type and amount of life insurance based on your needs and budget.

The last thing you want to do is short change your spouse because your coverage did not last long enough and you eventually outlive your term policy.

Don’ worry, we will be the first to tell you if a pension max strategy does not make economical sense for you and your spouse.

For example, a retiring employee with significant health problems would be better with the pension survivor benefits vs life insurance.