Retirement maximization involves using a single annuity on an older spouse, with part of the proceeds funding a life insurance policy for the younger spouse. While it can increase monthly earnings, drawbacks include insufficient funding and cancellation if the younger spouse dies first. Couples should carefully evaluate their options and consider factors such as age and health. Contracts with insurance companies should also be reviewed for potential problems.
Retirement maximization is a retirement planning technique that is recommended for some retiring couples, depending on their circumstances. Individuals who choose this option have a single annuity on their older spouse, setting aside part of the annuity proceeds to fund a life insurance policy. When the older spouse dies, life insurance is used to provide retirement income for the younger spouse. Individuals considering this option should review their choices carefully and ask an insurance agent for a detailed breakdown of the retirement funding choices available.
The idea behind maximizing pensions is that when people choose a single annuity, rather than a combined annuity with survivors’ benefits, the monthly annuity earnings are higher. The couple can set aside the extra income from the annuity to pay for the life insurance policy, and survivor benefits will be higher with the life insurance than they would be on the annuity. On the surface, maximizing pensions may seem like a good idea for couples preparing for retirement.
There are some drawbacks to the plan that need to be considered. In some cases, the annuity surplus may not be sufficient to fund an adequate life insurance policy. Creating such plans for couples who are about to retire soon may not even be in their best interest because there may not be enough time to fully fund the annuity. If the younger spouse dies first, the life insurance policy can be cancelled, but payments already made cannot be recovered and represent a loss to the surviving spouse.
When evaluating your retirement options and thinking about maximizing your retirement, it is wise to ask a life insurance agent for a cost-benefit breakdown for using this tactic as opposed to taking a joint annuity with benefits to survivors. Couples may also want to consider their age, proximity to retirement, and overall level of health, as these can all be factors in choosing the best way to fund their retirement. Another issue can be the benefits offered through a job, as it may not always be possible to choose the payment format for retirement benefits.
People choosing retirement maximization should ensure that their contracts with the insurance company are detailed and complete. They should check for potential problems in the contract, including circumstances where the life insurance policy will not be paid. If any of these situations occur, the surviving partner may not be able to receive benefits and could be left without retirement funds.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
