A Facelift For The Future

by Eloise Glaspie Life Sales Consultant

It seems that if there’s one thing we can count on today, it’s change. The world in which we live, work and play is constantly throwing new twists and turns at us. Even retirement is getting a makeover. In particular, we’re experiencing the demise of defined benefit qualified pension plans, as many employers have moved to defined contributions plans such as 401(k)s. This evolution is changing how we help clients plan for retirement, but we shouldn’t overlook those who will soon be eligible to receive benefits from old defined benefit plans that the employer may no longer be maintaining for newer employees. For example, federal, state, local and municipality employees are still covered by defined benefit plans, as are most school district employees. Pension maximization is a life insurance strategy used primarily with defined benefit qualified pension plans that we shouldn’t overlook. It can provide survivor benefit protection outside of the retirement plan while allowing the retiree to elect a “life only” option at retirement.

THE FACTS

• Agent is a CPA and a registered representative
• Client is a married, 52-year-old male
• Client is retiring in one year from Federal service with multiple retirement income choices to consider

THE GOAL

Create a retirement income plan that will provide the client with the largest retirement check while still protecting survivor income if the client passes away first. Utilizing a personal life insurance policy further ensures that the heirs will not be disinherited.

THE COURSE OF ACTION

Four years prior, the agent received the client’s name as a referral from another client. During the agent’s analysis of the new client, it was noted that all of the client’s assets were held in qualified plans. At that time, the agent and client sat down to discuss potential retirement issues that might arise given the asset allocation, but no further action was taken. 

Recently, the client was visiting with another insurance agent at his church and the discussion centered on transitioning from his working life to life as a retired Federal employee. Several concerns arose, primarily that of how to provide survivor income if he were to pass away before his beneficiaries. This led the client to remember the conversation he had with his agent and CPA four years earlier regarding retirement planning. Because of his elevated level of concern, he knew it was time to follow up and request an appointment to discuss what could become of his future.

THE SOLUTION

Knowing the Federal plan would provide no inheritance for the children if both the client retiree and spouse passed away during retirement, the agent began designing a protection plan that would allow the client to choose the sole life option on his pension (which increased his monthly retirement benefit by nearly 30%) while providing an income tax-free death benefit to provide income for and take care of his spouse. However, if both the client and his spouse were to pass away prematurely, the Federal pension would cease to exist thus disinheriting the couple’s children. The client was not previously aware of that provision and felt it was not acceptable for his future plans.

In an effort to make sure all of the client’s needs were taken care of by this retirement plan, the agent phoned Creative Marketing for assistance. With their combined guidance, the client applied for $900,000 of life insurance coverage, spreading the risk among three separate carriers. Because the client’s spouse was required to sign paperwork relinquishing her right to survivor income through the Federal pension, the agent suggested she own the policies.

THE RESULT

For the client: The powerful pension maximization strategy, when combined with a well-thought-out and thorough plan, allowed the client to feel as though his entire family’s future had gotten a makeover. The client was approved at preferred best due to excellent health and felt reassured that his family would be completely taken care of for many years to come.

For the agent:

If you have clients who are between the ages of 50 and 65 who are married and are participants in a qualified defined benefit retirement plan, don’t hesitate to call them to schedule a meeting to discuss their future pension options. Remember, when you need assistance giving your clients and their families the retirement makeover they deserve, your Life Sales Consultant is just a phone call away.

FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. 11813 - 2011/7/15