The goal is to provide the spouse with the same benefit amount as if he or she elected the Joint and Survivor benefit option while the extra funds not used for the guaranteed investment provide the plan participant with a larger, “maximized” pension benefit. When the plan participant dies, a guaranteed benefit – which is generally income-tax-free – is paid to the spouse beneficiary. The benefit can then be used to replace the lost pension income resulting from the plan participant’s death. This can be accomplished by taking the benefit proceeds as a life settlement option, using the benefit proceeds to purchase an annuity, or using other savings vehicles.

Pension Maximization can be a strong strategy for teachers, federal government employees, and state and municipal employees. It can also be good for married individuals who participate in defined benefit pension plans and are comfortable using a portion of their pension benefit to fund a personally owned, guaranteed vehicle.