Broker Check


| October 01, 2018


If you’re retiring with a pension, one of the biggest decisions you’ll make is if to take a higher life-only annuity or a joint and survivor benefit that offers a lower payout but would continue until the death of the survivor.

If the one with the pension is likely to die first, the joint pension is usually the best decision.  But you may have heard at a seminar or from friends or coworkers about a strategy known as “PensionMax”.  The idea of pension maximization is that by taking the higher life-only benefit and using the extra income to buy life insurance, the survivor can use the life insurance to provide at least the same income they would have received from the joint and survivor pension.

This strategy doesn’t work for everyone.  Here are some considerations to make before you irreversibly sign your pension away.

What funds will you have to pay life insurance premiums?  Taxes are due on your pension payment, so the funds you will have available to pay for life insurance are less than the difference in the two payout amounts.

What term of life insurance are you considering?  Many choose 20-year term because of the lower cost and the idea they will not outlive it.  But many people do, and it may be too late or too expensive to replace it then.  Consider a combination of cost-effective insurance to be sure the right amount of money is there at the right time. 

How much life insurance do you need?  Most calculators show that today it takes about $600,000 to generate a monthly payment of $2,500. Many people underestimate the amount of funds needed.

Can you qualify for life insurance?  Don’t believe you’ll get insurance at a low rate you’ve heard advertised.  If you’ve had an illness, take medications, or are a smoker, you’re not likely to get insurance at a rate that makes this a good strategy for you.

I encourage you to get assistance with this very important decision.  Whatever you do, don’t sign away a pension until you have sufficient life insurance with a policy issued and in your hands!







Laura Mickels has spent more than 30 years working for investors with both Wall Street and independent firms.  CochranMickels Retirement Specialists provides personalized planning and investment services to individuals approaching and in retirement.


These are the opinions of Laura Mickels and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.