Page 53 - Ready Set Retire

Ready. Set. Retire!

of a joint payout that will continue as long as one spouse is
alive, or it can take the form of a period certain, like life with a
10 or 20 year period certain. This means it pays out for a
minimum of that 10 or 20 year period of time, regardless of
whether the primary recipient is alive or not. In most cases,
both benefits will die with the second spouse, so in any case,
your pension dies with you.

But wait! That’s a lot of money. If my pension is $40,000 a year,
that’s the equivalent of $1 million. Wouldn’t you like a way to
keep that money for your loved ones once you are gone? Well,
there may be a way.

We call this Pension Max, and it’s been around for a long time.
The first thing to understand about pensions is the survivor
benefit is never free. It always involves a reduction in payouts,
and those reductions are usually permanent. I say usually
because some pensions have a “pop-up” feature which restores
your full benefit if the beneficiary spouse predeceases the
collecting spouse. That’s a valuable feature, but doesn’t fix the
whole problem.

For our purposes, we will assume no pop-up feature. We will
assume a pension of $40,000 a year for a single individual, and
a 20% reduction for the maximum of joint income, or $32,000
a year taxable income.

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