Getting the most from your pension distribution |

Getting the most from your pension distribution

Jeffrey Apps and Tracy Tutag

How does life insurance affect your pension payout? Life insurance can enable you and your spouse to reap the full benefits of your pension. If you are married and entitled to an employer-sponsored pension plans require you to choose between at least two monthly payout options: “Life Only” or “Joint and Survivor”. The decision you make regarding these options can have a significant effect on your retirement. So, what’s the difference between these two payout options and which one is right for you?Life Only pays the maximum pension income for as long as you live, but upon your death the income stops. This approach is practical if you are unmarried or there are other means to support your spouse in the event that you die first.Joint and Survivor addresses the surviving spouse’s need for income by continuing to pay a pension after you die. But the amount of pension income payable while you are both alive can be significantly less than the sum you are eligible to receive under the “Life Only” payout option. If your spouse dies before you, you generally continue to receive the reduced “Joint and Survivor” income. In this case, you are paying for a benefit (continuing income for your spouse) that no one ever receives.One effective way to help maximize the payout of your pension plan while also protecting your spouse is to purchase life insurance. The premise is a simple one. You can choose your pension’s “Life Only” benefit, which pays your maximum pension income for life and purchase life insurance, which can pay your surviving spouse benefits in the event of your death. This approach not only allows you and your spouse to reap the full benefits of your pension plan for your lifetime, but also offers much greater flexibility than most employer sponsored plans offer. With life insurance, your surviving spouse or beneficiary can decide to take the insurance proceeds in a lump sum, as income for life, or as a combination of the two. Unlike the standard pension options, which often require you to make your decision years in advance, with life insurance this decision can be made at the time the funds are needed. Of course, the sooner you buy the life insurance, the lower the cost might be.Consider the following benefits of using life insurance as a complement to your pension plan 1. Because you can’t know when you or your spouse will die, you can only guess which pension option will be the better choice for the rest of your lifetimes. Life insurance reduces the risk of guessing and makes it reasonable to choose the “Life Only” option.2. Your surviving spouse/beneficiary gains greater flexibility in choosing how and when to receive survivor benefits.3. If your spouse predeceases you, your policy can provide a death benefit to any other beneficiary of your choosing, as long as the premiums have been paid. You may be able to use cash value in some permanent policies to supplement your retirement income.Taking the steps now to help maximize pension income and enhance the flexibility of your options can help ensure that you and your spouse will have the resources you need. AXA Advisors, LLC does not provide legal or tax advice. Please contact your tax or legal advisor, as well as your financial advisor, regarding your individual situation.Jeffrey Apps & Tracy Tutag offer securities and investment advisory services through AXA Advisors, LLC (member NASD, SIPC) 1290 Avenue of the Americas, New York, NY 212-314-4600 and offers annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC and its subsidiaries. They can be reached locally at 970 926 6911 or tracy.tutag@axa-advisors.comVail, Colorado

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