Pension Maximization with Life Insurance

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is Pension Maximization?

Pension maximization is a retirement strategy where you choose a higher single-life pension payout and use part of this income to purchase life insurance. This approach aims to maximize retirement income while ensuring financial security for a spouse or beneficiaries.

How Does Pension Maximization Work?

  1. Choosing Pension Option: Opt for a higher single-life payout instead of a lower joint-life payout.
  2. Buying Life Insurance: Use a portion of the higher payout to buy a life insurance policy.
  3. Benefit for Spouse: The spouse receives the life insurance death benefit if the pension holder dies first.

Advantages

  • Higher initial monthly income
  • Flexibility in beneficiary options
  • Potential cost savings on insurance premiums

Disadvantages

  • High insurance premiums, especially for those with health issues
  • Investment risk if the policy includes an investment component
  • Complexity in planning and execution

Who Should Consider Pension Maximization?

  • Individuals in good health
  • Those with a significant difference between single-life and joint-life payouts
  • Retirees seeking more control over retirement income and beneficiaries

Example

John chooses a single-life pension of $3,000 per month over a joint-life pension of $2,200 per month. He uses $300 per month to buy a $500,000 life insurance policy. If John dies first, his wife receives the $500,000, ensuring her financial security.

Pension Maximization Life Insurance Calculator

Conclusion

Pension maximization with life insurance can effectively balance maximizing retirement income and providing for loved ones. Consider your health, financial situation, and insurance products to determine if this strategy is right for you.

Need Help Getting Life Insurance Coverage?

Contact us if you need help purchasing a life insurance policy. The service is free of charge.

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Questions From Our Readers

Do Pensions Have Life Insurance?

Pensions typically do not include life insurance. However, some pension plans offer survivor benefits that provide income to a spouse after the pensioner’s death.

Do You Need Life Insurance if You Have a Pension?

You might need life insurance even if you have a pension, especially if your pension does not offer sufficient survivor benefits or if you want to ensure financial security for your dependents.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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