Financial Strategies Group

FINANCIAL STRATEGIES GROUP 24 Take a look at the example below, and you will see that this plan has several different options. You get the largest monthly amount up front ($2,600/month) if you exclude your spouse altogether. It is important to note that to exclude your spouse completely (and to reduce the amount they receive) you will likely need to get their signature. The risk with this option is, of course, if you pass away before your spouse. With this option, once you pass away your spouse receives nothing, nada, zip. If your spouse outlives you by 10 or 20 years they will miss out on all those months of income. The option that pays the least is the 100% joint life option at $2,000/month. With this option, once you pass away your spouse continues to receive the same amount you have been getting but you have to take a $600/month reduction in income upfront. The Joint Life 75% and 50% allow your spouse to get 75% or 50% of your pension amount after you die, but again, you take a bit of a haircut up front for these options. When to Exclude Your Spouse From my experience most will choose to leave their spouse on for at least a portion but there are circumstances when you may want to exclude your spouse. The main reason to exclude your spouse is when their health is poor. Think about it, you may not want to receive a reduced amount for life by including your spouse when they are likely to pass away before you. As the old saying goes "Anything can happen" but remember good planning is putting the odds in your favor. You will also want to know if your pension has a rebounding option. A rebounding option is when your pension reverts or rebounds back to it's "your life only" amount in the event your spouse dies before you. Another reason someone would exclude their spouse is when they are able to purchase enough life insurance on themselves to replace the pension income but at a lower cost than they are giving up to include their spouse. Using our above example, if this employee was able to buy a large life insurance policy for less than $600 per month (the difference between Life only and 100% Joint life) it may make sense to exclude their spouse and buy the life insurance policy. This strategy is referred to as Pension Maximization. There are many other factors to consider (taxation, policy guarantees, etc.) so I would encourage you to work with a Financial Planner to help you analyze this option. Pension Option Your Life only $2,600 Joint Life 100% $2,000 Joint Life 75% $2,150 Joint Life 50% $2,300 Monthly Income While Both Living

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