SPIA

A client who had done some planning work with M Williamson Insurance Services in the past sent over a referral client to us by the name of Jim. Jim was the president of a local bank, and his bank offers a defined benefit plan, also known as a pension plan. From 1981, when he started, until 2018, his employer made contributions on his behalf. Jim had a good fundamental background of risk management and legacy planning due to him having history in the financial services industry. He understands that the pension payout option may not be the best method for achieving his long-term goals. Jim’s main concern is that, in the event of his death, his wife would not receive income from his pension.

When it was time to elect a pension payout option, the pension company presented Jim with three choices. The first option was a lump sum payment of $294,138. The second option offered him $2,070 a month for the rest of his life, with nothing going to his wife in the event of his passing. The third option was $1,751 a month under a 100% joint and survivor plan. Jim felt there had to be a better option out there for him to leverage his lumpsum to generate more monthly income than what his pension plan was offering. His main priority was that his wife would still receive income in the event he passed.

 Solution

Jim made it very clear during our conversations that he was willing to give up some monthly income to ensure that his wife would continue to receive payments in the event of his death. After understanding the couple’s objectives, it became evident that they needed something Guaranteed for Jim and his wife’s life. We recommended a Fixed Index Annuity with a guaranteed income rider. This rider ensures that, regardless of market performance, once we activate the income, the payments are guaranteed for life. We also were able to make it joint so that the income amount was not only guaranteed for the entirety of Jims life, but it also covered his wife in the event of Jims passing. The best part was that the monthly income payment was 12.21% higher than what he would have received under the joint survivorship plan offered by his pension.

We advised Jim that the best solution was to elect to take the lump sum check and roll it into a Corbridge Fixed Index Annuity with a guaranteed income rider. Once the carrier received his check, we recommended that Jim and his wife opt for immediate income. They chose this option and now receive $1,994.58 a month. This payment will remain the same until both Jim and his wife pass away. Although this amount is $76 less per month than the single life pension payout option, Jim was thrilled to make this trade-off to ensure his wife would still receive income in the event of his death.

If a situation like this arises, please contact us, and we will help you explore the entire market to find the best deal for your clients.