Quick Read
Robert chose the $4,800 single-life pension over the $3,900 joint-survivor option, redirecting the $900 difference to fund a $720,000 life insurance policy for his wife.
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When Robert began preparing for retirement at age 64, he faced an important decision.
Like many retirees with traditional defined-benefit pensions, Robert was presented with two options. He could elect a single-life annuity, which would provide the highest possible monthly income but would end when he died. Or he could choose a joint-and-survivor annuity, which would continue paying a portion of the benefit to his wife if she outlived him.
At first glance, the joint-and-survivor option seemed like the obvious choice. But when Robert looked at the numbers, he realized the decision was more complicated.
His pension offered $4,800 per month under the single-life option. The 50% joint-and-survivor annuity, however, would reduce the monthly payment to $3,900. In effect, Robert would be giving up $900 every month for the rest of his life in exchange for survivor protection.
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Thankfully, Robert was able to employ a pension maximization strategy that allowed him to take the higher single-life pension and still leave his wife with ample protection.
Using multiple products for complete protection
What Robert opted to do was accept the higher single-life pension option but use the extra $900 per month he received to buy a life insurance policy on which his wife was named as the beneficiary. Robert discovered that he could purchase $720,000 worth of coverage with that money.
