So, you have a Pension. That is really great news.
You’ll receive a monthly retirement check for the rest of your life.
That could be a lot of money if you live long enough to collect it all.
More than $1 Million in fact.
But what if you don’t live long enough into retirement to collect all you have coming to you?
Fortunately, most pensions have an option that can be selected at retirement where your benefits would continue to a named beneficiary should you not live long enough to collect all of your benefits yourself. It is a way to “insure” all the benefits that your pension has to offer.
Unfortunately, there is a cost to selecting a Survivor option. It reduces your pension by 10% to 15% or more. It depends upon the age of the selected beneficiary. You can typically see these costs from your pension account online. There is a calculator showing this cost. Additionally, your pension administrator can provide you with this information as well by contacting them.
WARNING! Selecting a survivor option through your pension can reduce your pension benefits by $100,000 or more and THERE IS NO GUARANTEE THAT ANYONE WILL RECEIVE A BENEFIT FOR THE MONEY YOU GIVE UP UNDER THIS OPTION. No guarantee, but why?
The Survivor Benefit option only pays a benefit if the selected beneficiary outlives the pension retiree. So, if the pension retiree lives 20 years into retirement and the selected beneficiary dies first in the 19th year, let’s say, there is no benefit for all the money the retiree gave up (paid). It’s all gone.
But what if there was a better way to “insure” your pension, one that offered a Guarantee? We refer this to this as Pension Maximization, sometime referred to SSB (Surviving Spousal Benefit) and it offers Guarantees that the pension option does not offer and can do it most time for no more cost, sometime even less.
The Pension Maximization option works this way. Rather than taking a reduction in your pension from the options the pension plan offers, here you “insure” your pension with a special type of life insurance that will be paid to a named beneficiary. Real insurance. This allows the pension retiree to select his or her full retirement benefits when they retire. When the retiree expires, the life insurance benefit will be paid to the named beneficiary either as a lump sum or as a lifetime income.
But there is more. With the Pension Maximization option, should the beneficiary die before the retiree, the retiree can name a new beneficiary. Something that the pension option probably will not allow. So, rather than losing thousands of dollars in pension benefits, the retiree is GUARANTEED, that someone will receive the money for those thousands of dollars they gave up (paid) to insure their pension.
Other benefits of the Pension Maximization plan may also include:
- Option for full or partial refund of all money paid should the beneficiary die first
- Option to receive living benefits for chronic illness and the need for long term care expenses
- Critical Illness benefit before retirement or during retirement for life-threating illness
- Terminal illness where life expectance is 12 months or less
While the primary function of the Pension Maximization plan is to ensure that the pension retiree will receive his full pension benefit either his or herself or through a named beneficiary, these additional benefits can protect the pension retiree in additional ways the pension cannot.