Pension maximization is the process of analyzing and choosing a pension payout option at the time of your retirement. It’s never too early to begin the process of reviewing pension options and weighing alternatives, however it is a process most commonly done within three years of your anticipated retirement date.
Every pension program is different, but the process we take to help you evaluate your various options is generally the same. It’s easiest to begin your understanding of the process by reviewing a hypothetical.
Let’s assume Frank and Mary are married. Frank is eligible for a pension at age 65. In this example, we’ll assume Frank (and Mary) have the following options:
As the example illustrates, Frank could take a reduction in payout in order to provide some assurances that his wife, Mary, will continue to receive some level of continued pension income should Frank predecease Mary.
As a part of the pension maximization process, we’ll help you explore the various factors that must be considered before making the decision, including:
- How might health insurance coverage factor into your decision?
- How will taxes impact your decision?
- Does it make more sense to take a reduced payout to protect your spouse OR should you consider taking a higher payout and using the increased income to acquire a life insurance policy? Such a strategy would require an analysis to determine proper coverage amounts necessary (life insurance is subject to underwriting requirements). • How might longevity (of you and your spouse) factor into your decision?
- How does your pension decision affect your Social Security benefits?
- How does your pension decision affect your other retirement and investment assets?
Pension Maximization is an important service that we provide to help our clients make a more informed and educated decision regarding their financial future.
*Investing carries an inherent element of risk. No strategy can guarantee a profit or prevent a loss.
Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary or investment advice. Any individuals used in scenarios are fictitious and all numeric examples are hypothetical and were used for explanatory purposes only. ©2009-2016 USA Financial®.• Rev 06.10.16