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Pension Maximization Definition

What Is Benefit Maximization?

Pension maximization is a retirement strategy for couples that involves opting for the highest possible annuity payout for one spouse’s lifetime while getting life insurance to provide income for the surviving spouse.

Pension maximization involves the use of two retirement income products: a life-only annuity, which compel offer the highest cash payout for one individual but stops when that individual dies, and life insurance, which can give income to the surviving spouse.

This is a risky strategy. Retirees may choose a safer joint-and-survivor annuity, which undertakings a benefit for life to both spouses.

Understanding Pension Maximization

The higher payout of a life-only annuity can be attractive for some unites given that the risk of such a strategy may be reduced with a life insurance policy. The reasoning is that the distended payout of the life-only annuity may provide more than enough extra income to pay the premiums of the life insurance system.

There are, however, many details to consider.

Couples who participate in an employer pension plan may consider pension maximization. Protection agents may suggest a strategy to couples in which the pension annuitant is in good health or if the couple has other sources of revenues to balance the risk of choosing a life-only annuity structure.

The longer the higher payments of such an annuity are made the assorted profitable it is for the couple. However, if the individual who is due the pension is likely to die first, then a joint pension or joint-and-survivor benefit may be the richest choice.

Pension Maximization Reasoning

With pension maximization, if the annuitant dies first the surviving spouse inclination receive a

Pension Maximization Risks

There are many important factors to consider before attempting this procedure, including the health of both spouses, other sources of income, the tax implications, and the specific terms of the couple’s pension or medical scheme.

The key to success with pension maximization is protecting the surviving spouse by providing them with a sufficient income in eternity. Since such a strategy can be complicated, they should be discussed with a licensed insurance professional, financial planner, or economic advisor.

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