FEDweek

Choosing Among Annuity Options

Retirees who are entitled to a pension usually must make a choice, if they’re married:

* Single-life pension. As indicated, it covers only one life. Such a pension delivers a larger check but the cash stops flowing once the pensioner dies.

* Joint-and-survivor pension. This choice can provide lifelong cash flow to a surviving spouse. However, each payment is likely to be much lower than you’d get with a single-life pension.

Some advisors suggest a “pension max” plan. Here, a single-life pension is chosen because that will provide the most retirement income. To protect the other spouse, life insurance will be purchased on the pensioner, payable to the widow or widower.

Pension max strategies may or may not be advisable, depending on the cost of the life insurance and the payout to the beneficiary.