Pension maximization

Pension Maximization

A strategy in which a married couple purchases a single life annuity for the older spouse and a joint life annuity for both spouses. If the younger spouse dies first, the older spouse can continue to benefit from both annuities. If the older spouse dies first, the young spouse uses the death benefit from the single life annuity to purchase another single life annuity for himself/herself. The younger spouse will presumably be older at that point and will thus be able to receive a higher monthly payment.

Pension maximization.

Pension maximization is a strategy that begins with selecting a single life annuity for income to be paid from your retirement plan, rather than a joint and survivor annuity.

The next step involves using some of your annuity income to buy a life insurance policy. At your death, the annuity income ends and the life insurance death benefit is paid to your beneficiary, often your surviving spouse.

You do receive more income from a single life annuity than from a joint and survivor annuity, which translates to a larger pension while you're alive.

However, pension max, as this approach is sometimes called, has some potentially serious drawbacks. These include the cost of the insurance premiums, including sales charges, and an increased burden on your beneficiary for turning the death benefit into a source of lifetime income.

References in periodicals archive ?
Proponents of pension maximization recommend an alternative approach.
For advisors whose clients are facing these difficult decisions, it's time to take another look at a tried-and-true approach: pension maximization with life insurance.
5) Pension maximization may be particularly useful to the retiree who is reluctant to accept a permanently reduced retirement income to assure a survivor income to his terminally ill spouse.
If clients are at least 10 years from retirement, indicate a date 10 years prior to retirement to contact clients to schedule an appointment to review their retirement accumulation progress and to discuss the concept of pension maximization.
Indeed, there's an entire culture of pension maximization that encourages and supports this kind of behavior.
A life insurance strategy called pension maximization or, sometimes, pension enhancement may provide a more attractive overall benefit package for married couples than the normal joint and survivor (J&S) annuity option from a qualified plan.
Using a concept called pension maximization, Walton advises the Browns to establish an additional $350,000 life insurance policy in Jerry's name as a supplement to his existing coverage--$500,000 from personal coverage and $262,500 from his employer.
Two new Needs Analysis concepts, Key Person Valuation and Pension Maximization, expand the total number of Needs Analysis concepts to 15.
And generally speaking, we should not be considering cash value products a good monetary value as a protection vehicle either, unless the protection needed goes into the post-retirement upper ages, such as in the case of estate planning needs or pension maximization strategies.
One interesting example is pension maximization (PM).
Implemented as a desktop or Internet-based system, NaviSys' solution processes new business and in-force quotations for life products (Term Life, Whole Life, Universal Life, Variable Universal Life); annuity products (Deferred, Immediate, Fixed, Variable, Unbundled, Market Value Adjusted, Equity-Indexed, Structured Settlement); and advanced concepts (Deferred Compensation, Split Dollar, Business Continuation, Education Funding, Executive Bonus, Key Person, Mortgage Acceleration, Pension Maximization, Annuity Wealth Transfer and Retirement Support).