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PENSION MAXIMIZATION
"We make LIFE easy!"
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AT RETIREMENT, MANY OF US ARE GIVEN A CHOICE
AS TO THE TYPE OF DISTRIBUTION
THAT WE WOULD
LIKE TO RECEIVE ON A MONTHLY
BASIS FROM OUR
PENSION PLAN.
THE CHOICES ARE USUALLY
AS FOLLOWS:
SINGLE LIFE OPTION - THIS DISTRIBUTES THE HIGHEST AMOUNT POSSIBLE
FOR THE LIFE OF THE RECIPIENT
BUT DISTRIBUTIONS
TERMINATE AT HIS OR HER
DEATH.
JOINT AND FULL SURVIVOR OPTION - THE FULL AMOUNT THAT IS DISTRIBUTED TO THE
RECIPIENT IS CONTINUED
DURING THE LIFETIME
OF HIS OR HER SURVIVING
SPOUSE.
JOINT AND REDUCED SURVIVOR OPTION - THIS MAKES A MONTHLY DISTRIBUTION TO THE
RECIPIENT AND SUBSEQUENTLY A REDUCED PERCENTAGE,
USUALLY 50%, FOR THE LIFETIME OF A SURVIVING
SPOUSE.
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BY SELECTING ONE OF THE OPTIONS THAT INCLUDES
SURVIVOR BENEFITS, ONE GENERALLY GIVES UP
A SIGNIFICANT AMOUNT OF MONTHLY INCOME!
IN PLANNING FOR THEIR RETIREMENT, MANY PEOPLE
HAVE DECIDED TO PURCHASE AN AMOUNT OF LIFE
INSURANCE WITH ALL OR SOME OF THE ADDITIONAL
CASH FLOW GENERATED BY TAKING THE SINGLE
LIFE OPTION.
THIS ALLOWS THE RETIREE TO RECEIVE THE MAXIMUM
DISTRIBUTABLE BENEFITS. IF THE RECIPIENT
DIES FIRST, THE SPOUSE RECEIVES THE DEATH
BENEFIT, WHICH CAN BE USED TO CONTINUE MONTHLY
INCOME THROUGH ONE OF THE MANY SETTLEMENT
OPTIONS AVAILABLE, OR PUT THE PROCEEDS IN
AN ACCOUNT AND TAKE DISTRIBUTIONS AS NEEDED.
THIS WORKS WELL IF PLANNED PROPERLY IN ORDER
TO GIVE THE SURVIVING SPOUSE AN INCOME AT
LEAST EQUAL TO WHAT HE OR SHE WOULD HAVE
RECEIVED UNDER THE PENSION PLANS DISTRIBUTION
CHOICES.
IF THE SPOUSE DIES FIRST, THE HIGHER DISTRIBUTIONS
FROM THE PENSION WOULD OF COURSE CONTINUE
FOR THE RECIPIENTS LIFETIME, AND THE LIFE
INSURANCE POLICY CAN BE CASHED IN OR THE
BENEFICIARY CAN BE CHANGED.
DEPENDING ON HOW THE OWNERSHIP OF THE LIFE
INSURANCE POLICY IS SET UP, THE FACE AMOUNT
CAN BE KEPT OUT OF ANY ESTATE TAX CALCULATION.
IT IS WORTH NOTING THAT
THE WAY THE INSURANCE
IS SET UP IS CRITICAL TO
THE PENSION MAXIMIZATION
CONCEPT WORKING. ONE MUST
BE CAREFUL TO SET
UP THE POLICY FROM AN EXTREMELY
CONSERVATIVE
PERSPECTIVE SO THAT THE
POLICY DOESN'T "DISAPPEAR"
BEFORE THE NEED FOR IT
DOES! |
CONCEPTS INDEX |
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