by Tenielle Shellman, Manager – Central Planning, Wealth Enhancement Group

Married pension plan participants typically must choose which pension option to take upon retirement and choosing between the various options can be a difficult task. Selecting an option that guarantees your spouse a percentage of the benefits after your death provides some extra security, however, it may also lower your current monthly benefits. Selecting a pension option that only pays until your death, on the other hand, can provide larger monthly payments, but does not offer any benefits to your spouse after your death.

Consider the following as you approach retirement and the selection of your pension option:

Life Expectancy – Statistically women live longer than men. According to the CDC a 65 year old male in 2005 had a life expectancy of 17.2 more years and a 65 year old female had an additional life expectancy of 20 years.

Health & Longevity – Health & longevity can impact life expectancy greatly. Consider the health of each spouse, as well as, each spouse’s lifestyle and family history. If the health of one spouse is poor, this may direct your decision to either a life-only option or perhaps a 100% joint & survivor option, depending on which spouse is not well and the circumstances of the illness or disability.

Cash Flow – In addition to the factors above, take a close look at your expected cash flow in retirement. Would the reduction in monthly benefit from the life only benefit to a 50% joint and survivor option or to the 100% joint and survivor option greatly impact your life style? If so, you may wish to take a benefit that provides you with more income, such as the life-only option or a reduced joint & survivor option.

Supplement the benefit with life insurance – In some instances purchasing a permanent life insurance policy prior to retirement in an amount that would provide the survivor with a similar monthly income benefit as a joint and survivor option would, may allow you to select the maximum monthly benefit and still provide your spouse with some income protection upon your death.

Features – Consider all of the features of the pension. For instance, does your pension provide a bounce back feature where if you have selected a joint and survivor option and your spouse passes away before you the benefit reverts back to the life-only option?

All of the factors mentioned above should be considered as a whole, weighing the costs and benefits of each. Please contact a member of Wealth Enhancement Group’s team to discuss your particular situation.