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.
Nonetheless, he notes that pension maximization can work in theory under the right circumstances.
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.
Pension maximization provides that third option: maximum pension payout and survivor benefits for the spouse--the best of both worlds.
Advisors aren't strangers to pension maximization, but as more and more boomers retire and make decisions about their pensions, it's wise to review some sticking points of pension maximization in order to provide the best advice to clients.
Indeed, there's an entire culture of pension maximization that encourages and supports this kind of behavior.
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.
The expanded treatment of the pension maximization concept in Needs Analysis easily and quickly determines how much insurance is needed to replace the "pension gamble".
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).
Moldt: "I have been involved in many pension maximization cases in the past six to seven years.