Avoiding the Pension Trap

Retirement Council of Alabama

Pension Maximization-Avoiding the Pension Trap

DROP Deferred Retirement Option Plan

ALTERNATIVE SURVIVORSHIP STRATEGY

                                                                       Alternative 

                                                                       Plan                                  TRS

Continues Income for surviving spouse, if

retiree dies first                                                YES                                  YES

Lump Sum Available to surviving spouse         YES                                 NO*

Beneficiary can be changed without affecting

retiree’s income If the beneficiary dies

first                                                                    YES                              NO**

Beneficiary can be changed without

affectingretiree’s income,If retiree and

beneficiary (spouse) divorce                            YES                              NO**

*Lump sum only available on Option #1 with TRS

**Retiree income will change if new beneficiary is not the

     same age as previous one.

New beneficiary benefits effective

immediately upon change                                YES                                 NO*

Cash Value belongs to retiree and could

be used to supplement surviving

retiree’s income in the event beneficiary

predeceases retiree                                        YES**                             NO

Multiple beneficiaries can be

named to receive  survivor benefits               YES                                 NO

Must QUALIFY to provide survivor

benefits                                                           YES                                NO

* The replacement beneficiary must be in place for at least two years to become effective. However, if the retired member dies within this two year period, no monthly survivor benefit is payable.

**Use of insurance that builds cash value