Should the older spouse die first, the surviving spouse will use the life insurance proceeds to purchase a single annuity to fund the remainder of his or her retirement. At this point, the higher age of the surviving spouse will allow for more annuity income than he or she would have received at the beginning of the pension maximization process.
The basis of this strategy is that the extra money received from the single life annuity on the older spouse yields sufficient income for the couple to live on and also to fund a life insurance policy on the older spouse.
However, there are many important factors to consider before attempting this strategy, including the health of both spouses, other income, tax implications and the specific terms of the couple's pension or medical plan. Plans should be discussed with a licensed insurance professional or financial planner.
Investment dictionary. Academic. 2012.
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