A Pension Strategy That May Boost Your Income

This week, Craig Siminski, of CMS Retirement Income Planning, shares with us an article discussing how a strategy called pension maximization may enable a married pensioner to elect the higher payments of a single-life annuity while also providing for the spouse’s financial future:

If you have a traditional pension — also called a defined benefit plan — when you retire, your plan may offer several payout options, including a qualified joint and survivor annuity (QJSA) if you are married. A QJSA is an annuity that pays a dollar amount (usually monthly) for the rest of your life, with at least 50% of that amount continuing to your spouse after your death.

If your spouse consents in writing, you can waive the QJSA and elect instead to receive a single-life annuity. With this option, payments are made over your lifetime but stop upon your death. Single-life annuity payments are generally significantly higher than QJSA payments, but your spouse would receive no pension benefits after your death.

Life Insurance Strategy

A strategy called pension maximization may offer the best of both worlds. Using this strategy, your spouse waives the QJSA and you elect the single-life option. You and your spouse then use the additional pension income to purchase insurance on your life, with your spouse named as beneficiary.

If you die first, the pension payments will stop, but your spouse will receive the life insurance death proceeds free from federal income tax. By coupling the larger pension payments with a life insurance policy, you might increase your total income during…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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