I’ve blogged about this topic in the past, but I think it’s a good thing to talk about it every once in a while.  When you retire, you are faced with the decision of having to choose a distribution plan.  There are two common options for pension distribution:

The Single Life Option allows you to receive the highest possible monthly income throughout your life. The only problem is that your benefits will be paid ONLY as long as YOU live.  At your death, your pension benefits die with you.  That’s fine if you’re single, but what if you’re married?  If still living, your spouse will be left with no monthly income from your pension plan.

The second option is the Joint & Survivor Option.  This option pays a reduced monthly pension (typically 50% to 85% of the single life benefit) for as long as either you or your spouse is alive.  This option guarantees a payment for the surviving spouse.  What happens if your spouse dies first?   Unfortunately, you will continue to receive the reduced income and you lose the gamble.

if your spouse dies first?   Unfortunately, you will continue to receive the reduced income and you lose the gamble.

Most people select the Joint & Survivor Option because they do not want to leave their spouse without income. However, most people don’t realize that you can use a to maximize your pension benefits.

Here’s how it works: you purchase a sufficient amount of life insurance on yourself, naming your spouse as the beneficiary.  The life insurance death benefit will replace the lost pension benefit if you die first.  At retirement, you and your spouse opt to take the single-life benefit option in order to receive the maximum benefit, using a portion of the additional pension funds – usually much less than the difference between the amount for a single versus a joint and survivor benefit – to pay for the life insurance premiums.