Seniors Sitting on Bench

Pension Maximization

Would you like to receive 100% of your pension income while still providing your spouse with an income at your death? Pension maximization provides both.

Most pensions require you to make a choice. You may take 100% of your pension income, and leave nothing to your spouse at your death, or you may take a reduced benefit during your life and receive a benefit for your spouse's life as well. The following examples present the most common pension options:

Option A

You receive 100% of your pension income during your life, but your spouse receives nothing at your death.

Option B

You receive a significantly reduced benefit during your life (often 20-25% less,) and your spouse receives an equivalent benefit at their death.

Option C

You receive a reduced benefit (perhaps reduced by 5-15%,) and at your death, your spouse begins receiving a benefit of 50% of the amount you were receiving.

Consider the Following Scenario

John and Mary Smith are both age 65. John has a pension in which he may receive: $2,000 for his life or $1,500 for both. Here are the three options John has:

  Percentage Received Monthly Benefit Spouse's Benefit
Option A 100% $2,000 $0
Option B 75% $1,500 $1,500
Option C 85% $1,700 $850

When you retire, the monthly cost of choosing an option (other than Option A) will be as follows:
Option B: the cost per month is $500.00. The cost per year is $6,000.00.
Option C: the cost per month is $300.00. The cost per year is $3,600.00.

The Pension Maximization Alternative

If you were John, which option would you prefer? What if there was another way, one allowing you to truly maximize your pension. To maximize your pension, why not take Option A and use the excess to fund the benefit you want your spouse to receive?

For example, assume you want your spouse to receive the $1,500 benefit in option B. You can take Option A, then use the extra $500 per month (that you're receiving as a result of choosing Option A over Option B,) to purchase a life insurance policy. If this money, annuitized over retirement life expectancy, exceeds $1,500, then you have maximized your pension!

This Web site is intended for general information purposes only. It does not nor is it intended to constitute legal, tax or investment advice. Alliance America is not a lawyer, registered investment advisor or investment advisor representative, and is not engaged in the practice of law or the business of investment advice.