Pension Maximization

When a firefighter retires out of his or her department, they typically meet with a pension administrator to review the various income options available. These options, of course, are based in large part on years of service, and annual income during the years preceding retirement.

But there is a second variable that is often overlooked by Member firefighters: the survivor's benefit. Simply put, the survivor's benefit guarantees that retirement income will continue even if the firefighter dies first. In other words, in order to protect a spouse against a catastrophic loss of income that would occur if the firefighter died first, the pension is often arranged so that payments continue for the longer of the two lives. Thus the spouse continues to receive a pension income, even if he or she outlives the retiring Member. This is a very important benefit.

But it comes at a cost. If the pension is taken in a "single life expectancy," the monthly income will likely be hundreds of dollars more than if the pension is distributed through "joint life expectancy." The logic here is simple: a joint life pension will, in all likelihood, pay out over a longer period of time than a single life pension. Thus the monthly income is significantly reduced.

How Pension Maximization works:

Consider this: the decision to reduce one's monthly income, in order to protect a surviving spouse, is - by definition - the purchase of life insurance. That's right. A Life Insurance policy has the same function -- to provide a cash benefit in the event of death. Thus, the decision to select a joint life pension should always be measured against the possibility of insuring the retiring Member's life so that a significant cash benefit might be paid to the spouse, in lieu of a continued retirement pension.

Some Advantages of the Pension Maximization strategy:

1) Higher retirement income due to single life expectancy pension.

2) Protection of surviving spouse due to life insurance policy on retiring Member.

3) Higher income in the event spouse dies first.

4) Flexibility to name new beneficiaries if spouse dies first.

5) Elimination of political uncertainties surrounding state and local government pension obligations.

Note: Because the spouse owns the Pension Maximization insurance policy, he or she retains control of the beneficiary. They are assured of receiving the benefit if the retiree dies first.

Who is the best candidate for Pension Maximization?

1) A firefighter in excellent health, 0 to 9 years from retirement.

2) Who has reviewed their pension options thoroughly, and understands the difference between a single, and joint life expectancy.

For a Free, no obligation review of your Pension Maximization options, click HERE.