Life & Health Insurance, Retirement Planning

Get The Most Out Of Your Retirement With a Pension Maximization Strategy

Are you a member of a Defined Benefit Pension Plan?  If so, you may want to inquire about a Pension Maximization Strategy and get the most out of your retirement.

There are two options in regards to receiving a pension benefit upon retirement: joint-life or single-life The single-life option provides the pensioner with a larger monthly benefit than the joint-life option However, as the name suggests with the single-life option, the pension benefit ends when the pensioner passes away.

The Pension Maximization Strategy provides the best of both worlds to the pensioner and their spouse. The pensioner can extract the maximum monthly benefit possible from the pension, as well as providing financial support for the spouseWhether you are near retirement or have just started your career, this could be a great fit.

How is a Pension Maximization Strategy accomplished?

Step 1: The pensioner applies for a permanent life insurance policy on their life.  Upon the pensioners’ death, a tax-free death benefit is paid to their spouse.  The spouse can now use the life insurance proceeds to replace part or all of the income they would have received if they had the joint-life pension.

Step 2: On retirement, the pensioner selects the single-life pension option (requires spousal consent).

Possible Outcomes
What Happens… Joint-Life Pension OptionPension Maximization Strategy

(Single-Life Option)

While both spouses are aliveReduced pension benefit is receivedMaximum pension benefit is received
If the pensioner dies firstSpouse continues to receive the reduced pension benefitSpouse receives tax-free death benefit from the life insurance policy to provide retirement income
If the spouse dies firstPensioner continues to receive the reduced pension benefit for their lifetimePensioner continues to receive the maximum pension benefit, and can keep the life insurance policy for other loved ones/legacy, or access the policy cash values for personal use
Future HeirsReceive nothing from the pension plan after the spouse diesCan receive funds from the life insurance policy

Each scenario requires a thorough review with a licensed and experienced insurance advisor or Certified Financial Planner. Above all, we want to ensure the Pension Maximization Strategy is right for you and your family.

For more information on the Pension Maximization Strategy or to find out if it’s a viable option for you, contact Jeff Graham at (604) 363-7549 or jeff@firstoakfinancial.ca.

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DISCLAIMER: this commentary is provided for general informational purposes only and does not constitute financial, insurance, investment, tax, legal or accounting advice.