Post on 02-Apr-2015
Pension Structure and Maximization
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$50,000
Option AMaximum
Option B85%
$50,000 Per Year
$42,500Per Year
$7,500.00
Per Year
Difference
$7,500.00
$7,500.00
$7,500.00
$7,500.00$7,500.00
$7,500.00
$7,500.00
$7,500.00
$7,500.00
= $225,000
You Die
$1,000,000
Pension Company
$50,000 per Year
Pension Company
Pension Company
Pension Company Keeps Death Benefit
You and Your
Spouse are Dead …
Pension Company
has the Money…
…Your Kids Don’t
Real-Life Case # 1 Retiring Officer John Doe Age 43
Final Average Salary $90,000.00
Pension= 50% of FAS or $45,000.00
In Good Health
Life Expectancy- Age 78*
*Source: Social Security Administration
Mrs. Doe (John’s Wife) is the same age and also in good health.
Option AMaximum
Option B85%Difference
$45,000
14% $38,700
$6,300.00Per Year
Officer John Doe
Doe Elects Option A (Full $45,000.00)
Purchases $1,000,000 Life Insurance Guaranteed to Age 100 for $6,000.00
per year*
*Estimate based on 43 year-old male in good health- rates are illustrative and vary from
person-to-person
As per Social Security Rules, Officer Doe dies at
age 78Mrs. Doe Collects $1,000,000 Tax-Free
From the Insurance Company
*Note: The Doe’s Have Paid Approximately $204,000 into the
Policy over 34 years and Will Receive $1,000,000.00 in Death Benefit. In This Case, the Return is Over 8.5%
Tax Free.
Mrs. Doe’s Options:
1. Live on the $50,000 Interest and Leave the Entire $1,000,000 Proceeds to the Children
2. Use It All (Approximately $70,000 Per Year Over 20 years to Compensate
for Inflation)
3. Use What She Needs and Leave the Balance to the Children
End Result:The Doe’s Usually Pay LESS Than the Cost of “Option B” Every Year
Mrs. Doe Has MORE Money and MORE Options In Her Later Years
Kids Receive Whatever is Left Over (Instead of NOTHING) and say nice things about you when you’re gone.