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Life to the Max, Opportunity Missed

Monday, November 7, 2016 13:31
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We’ve blogged on Pension Maximization before (most recently here); briefly, it’s using life insurance to cover the shortfall if one chooses the “no period certain” option at pension decision time.

In that case, the gentleman in question was able to retroactively resolve a potentially disastrous situation.

Today, I learned of a situation with a much sadder ending:

Susie, my longtime client, asked if I would help her recently widowed mother with her health insurance. Even though I’ve sent the bulk of my clients to Cornerstone for assistance, Susie and I determined that this case needed a more personal, hands-on touch. So I met with them this morning. As I expected, Nancy (her mom) is every bit as lovely and bright as her daughter, and we started discussing her needs. What I had not known prior to this morning was that Nancy’s husband (Susie’s dad) had passed away, unexpectedly, in July.

This caused Nancy some major collateral damage: when Joe had retired 18 months before, he’d chosen the pension option with the greatest monthly payout, which stopped when he did. To further compound the problem, this also meant that she was no longer eligible to keep the health insurance. And adding insult to injury, while Joe had told her that he had $200,000 in life insurance, the policy was actually only $25,000, a good chunk of which went to pay for his funeral.

The good news (for certain values of “good“) is that she qualifies for a pretty substantial health insurance subsidy next year. The bad news is that she never replaced her health insurance, which ended in early August. Now it’s too late (she missed the window for a special open enrollment opportunity). She likely qualifies, however, for a hardship exemption from the ObamaTax.

Still, had she and Joe sat down with a professional agent (*cough*) when they were getting ready to pull the retirement trigger, perhaps she could have avoided this unfortunate situation.

Food for thought.

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