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When a new pension election is presented to a retiree, you will usually have a few options.

If you are given the option of a systematic stream of monthly payments, you have a choice to make. Should you take a survivorship or life only payout? The former provides for the payments to continue to your spouse after you die. Life only payouts stop when you die. The tradeoff is that life only payouts are higher.

A colleague of mine was conducting a business review meeting with a husband and wife when he asked the husband if he took the survivorship or life only. He said, “I took the life only.” The wife looked up with a suddenly quizzical look on her face and said, “what does that mean?” This turned out to be not quite so happy a get together.

Power Couple

If you have a spouse that will need to depend on your pension after you are gone, then you will take the survivorship option, right? But that means that while you are living you’ll get less money each month. In addition, what if your spouse pre-deceases you? This scenario is all too common and it could end up costing you thousands of dollars of lost income over your lifetime. But if you take life only, you could leave your wife with a substantial reduction in monthly income. So what do you do?

The answer could be a pension replacement life insurance policy concept. Here’s how it works:

Life Only Pension – $2000 per month
Survivorship Pension – $1400 per month
$250,000 Pension Replacement Life Insurance Policy – $465 per month

In this example, if you take the life only option, your net monthly payment will be $1535 per month, $135 more than the survivorship amount. If you pass away before your spouse, she can turn the tax free life insurance benefit into a lifetime annuity. Depending on her age, this could replace the pension amount. If she dies first, you can cancel the life insurance policy and now receive $2000 per month, or keep the life insurance policy in force for your kids if that makes the most sense.

The thing to keep in mind here is that this is planning you need to do on the front end of your pension decision. Pension elections are permanent once they are put in motion. Go to and browse quotes. Give us a call and we’ll help guide you through the process of whether a pension replacement life insurance strategy is right for you.

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