Maximize Your Pension and Protect Your Loved Ones

When it comes to retirement, making the right pension decision can mean the difference between financial security and lost income. If you or your spouse have a pension, you’ll likely be faced with a tough choice:

• Take the full pension amount but risk leaving your spouse with nothing if you pass away first.

• Take a reduced pension to provide your spouse with a guaranteed income after your death.

  
  

Most retirees choose the Joint & Survivor pension option to ensure their spouse gets something—but that means permanently reducing their pension check. Fortunately, there’s another strategy that allows retirees to get the full pension payout while still protecting their spouse: Pension Maximization.

What is Pension Maximization?

Pension Maximization is a strategy where retirees take the full pension amount and use part of that income to fund a life insurance policy. This ensures that when the retiree passes away, their spouse (or other beneficiaries) receives a tax-free lump sum from the life insurance policy—often providing more financial security than the pension survivor benefit.

Example Story: How Pension Maximization Worked for John and Mary

John, a 65-year-old retiree, worked for 30 years at a manufacturing company. As he approached retirement, he had two pension options:

1. Full Pension Option: $5,000 per month, but Mary would get nothing if John passed first.

2. Joint & Survivor Pension Option: $4,000 per month, but Mary would receive $2,000 per month if John passed away first.

   
   

If John took the Joint & Survivor option, he’d lose $1,000 per month for the rest of his life—just to secure a reduced income for Mary.

Instead, John met with a financial advisor who introduced him to Pension Maximization. He chose to take the full $5,000 per month and used a portion of that extra $1,000 to purchase a permanent life insurance policy. The policy ensured that if John passed away, Mary would receive a $500,000 tax-free life insurance benefit—far more than she would have received from the pension’s survivor benefit.

Why This Strategy Works

✔ Maximizes Income: Retiree keeps the full pension instead of accepting a reduced payout. ✔ Tax-Free Benefits: Life insurance proceeds are tax-free, unlike taxable pension survivor benefits. ✔ Flexibility & Control: If the spouse passes away first, the retiree doesn’t lose money to a reduced pension. ✔ Estate Planning Advantage: If both spouses pass away, the pension stops—but the life insurance payout can go to children or other heirs.

Is Pension Maximization Right for You?

This strategy isn’t for everyone—it depends on factors like age, health, and pension details. However, if you or your spouse have a pension, it’s worth considering. A simple review could show whether Pension Maximization would provide more financial security for your family.

If you’d like a free consultation to explore your options, contact Sustainable Retirement Solutions today!