Taking a Look at the Pension Enhancement Option

Sometime in the late 1970’s we developed a concept that allowed people who had certain types of pension benefits to take the maximum payout option instead of the “Survivor Options”. It worked very well for the client if the client purchased an adequate amount of life insurance.

The benefits of this were…

  • More income while the two spouses were alive.
  • Insurance that replaced the spousal option if the retiree died.
  • The policy contained a cash account that could be used if needed.
  • If the spouse predeceased the retiree, the policy could be surrendered for cash value or could be used to create an inheritance for children or grandchildren.
  • Proceeds from the policy were tax free if paid to a named beneficiary.
  • In any case, the biggest asset the retiree had was now inheritable unlike the pension payout.

 Many people have forgotten this idea. There are still many defined benefit plans and there are still retirees that make the wrong decision at retirement. For most people when an ill-formed option is exercised it cannot be undone.

 If you have such a plan or know of a friend with such a plan, email me at [email protected]