How to choose between your pension options? Presented by Dan Scharlach

What is a defined benefit pension and how does it work  Defined pensions are a great employee perk/benefit (very few left today)  Can provide income for retirement without ‘traditional’ “market risks” (fluctuations)  Can offer some incentives for a spouse as well, even if not employed at company  At retirement, you have several options and choosing wrong is typically irreversible!!!!  Once you select your option it is usually set in stone for life (never changed)

How to select your option?  Typical pension will have around 5-10 different options to select from  Some include a lump sum as well  Several factors should sway your decision on how to choose  Health of all parties involved  Reduction in monthly income (for spousal benefits if married)  How you feel about inflation expectations moving into the future  How you feel about your companies’ financials and pension fund

Typical options overview….  Option A (100% life)  $2,000 a month for life  $0 spousal benefit  Option C (75% spouse)  $1500 a month for life  $1200 spousal benefit  Option B (90% & spouse)  $1800 a month for life  $900 spouse for life  Option D (50% & spouse)  $1000 a month for life  $1000 spousal benefit *All options shown here are hypothetical examples and are not real. They are based on real life ‘type’ figures that we have seen in the past. Please consult your specific pension plan for exact figures and assessment of options. Some have lumps sum options.

Which would you choose? Which would we suggest??  Choose carefully! We would suggest analyzing ages, health and future outlook  Age-if one party in the relationship is significantly older, that will have a bearing, as well as, if one is not healthy.  Insurability for Life Insurance would be worth considering  Future trends for inflation expectations  Future of the stability of the company and the pension plan  Future of the pension guarantee fund

Older retiree and younger partner (example one) (healthy)  If the retiree is older by 5 years or more there is a good chance of the spouse outliving that person by a fair amount.  In this scenario it makes sense to more seriously consider a higher spouse benefit  May even want to supplement with life insurance as well if not already in force.  In order to maximize a pension one would take the highest income option and supplement with life insurance for the partner to help ensure income continues.

How to maximize benefits assuming good health & age (1)  As you recall, option A had the highest pay; reason very few take this is because it dis-inherits ones partner…lets rethink!  In an ideal world you would take option A and guarantee the income would last regardless of the primary person life  What happens if the primary dies early and you choose anything other than option A?  Who gets the benefits if partner dies before the primary……PENSION plan keeps the benefits!!!! (no beneficiary allowed)

How to maximize benefits assuming good health & age (2)  If you choose option A and take out life insurance one can assign another beneficiary if partner dies first.  Assuming the numbers work out this can be an option that may help max benefits (if healthy)  If the partner is older this often does not make sense  Simple strategy that most consumers do not consider because it’s outside the box!

Most common, same age and same health (all in numbers)  This example is the most common trend in the industry  One must really crunch the numbers and consider all the risks and options  One should weigh all options on the old Ben Franklin benefits approach  What is worth more, money now or money later.  Talk to a professional or send us an and we will help! Risks next!

What are the risks in a pension plan and how do you plan?  Equity market volatility risk  Bond market risk (interest rate)  Inflation risk (eroding purchase power)  Pension risk (provider can’t make payments)…..Detroit municipality!!!!!!!  Currency risk  USD ($), oil, gold backed etc.  Life insurance risk (if coordinated)  Life ins guarantees are based on claims paying ability of issuing and how the contract is structured/funded.

Have a good balanced plan and hedge your risks  Consider taking the highest income pension option if appropriate  Weigh out ALL the risks so that you are not “up a creek with out a paddle”  Hire or seek professional advice if you want/need assistance with your selection  Feel free to call or me/us if you need advice or  Click here to get more information/reports

Disclaimer  The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Stratos Wealth Partners, a registered investment advisor. Stratos Wealth Partners and Innovative Wealth Partners are separate entities from LPL Financial