Solving the Pension Dilemma Using the Retirement Planning software

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Solving the Pension DilemmaUsing the
Retirement Planning software
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What is the Pension Dilemma?

• It is the decision that a retiring employee must
  make regarding the potential loss of income to
  his/her beneficiary at the occurrence of the
  retirees death.

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Why is this a Dilemma?

• The option, provided by the pension plan, which
  would continue income to the beneficiary, at the
  death of the retiree, involves a reduction in
  monthly income.

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Typical Sample Illustration

• Retiree aged 60 with a spouse two years younger
• 
  Retiree Spouse
• Maximum monthly retirement income
  3,600 0
• Survivorship benefit option 3040 3040
• Income Lost 561
• Note Many pension plans include cost of living
  increases. In that case, the amount of lost
  income increases each year.

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• Example with a 2 Cost of Living Increase
• 
  
  
  
• Maximum Option Survivor Option
  Lost Income
• 1 3601 3040 561
• 2 3673 3100 573
• 3 3746 3162 584
• 4 3821 3225 595
• 5 3898 3289 607
• 10 4304 3629 670
• 20 5246 4419 815
• 30 6395 5381 994
• In summary, you have purchased a term life
  insurance policy, from the
• pension plan, with an increasing annual
  cost.

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• The cost shown in the previous slide may be
  greatly reduced by purchasing your own individual
  life Insurance policy.
• Using our unique software, we can clearly
  determine the specific amount of insurance needed
  to protect the survivor.
• Assuming no life threatening health issues, we
  can keep the cost at its lowest possible level.

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Steps to determine cost comparison

• 1. Use the retirement planning software to
  determine the specific amount of insurance
  needed to protect the survivor.
• 2. Run the insurance company illustration to
  determine the cost of insurance and the number of
  years to pay.
• Look up pension option amounts
• Enter all data in the Pension Max section of
  the retirement planning software.
• 5. Compare totals to see which approach is most
  economically beneficial to the clients.

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The results are clearly demonstrated
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• Using the above example, the money saved, over a
• 30 year period amounts to
• 164,724
• This savings comes about as a result of paying a
• premium that does not increase and is paid for a
  fewer
• number of years.

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• Question
• Do you want the 164,724 or do you want to lose
  it?

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• In addition to the substantial cost savings, the
  other reasons to
• have your own life insurance are
• In the event the beneficiarys death
  occurs prior to the retiree,
• a new beneficiary
  can be named.
• Using the software, the amount of life
  insurance can be selected to fit the needs, of
  the retiree and spouse, instead of an amount
  pre-determined by the pension plan.

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• With this retirement planning software you can
  clearly see which choice is best for you.
• Then make your decision based on economics rather
  than intuition.