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Life Insurance, and your Pension?

Updated on May 30, 2012

We all know that the baby boomers are retiring, and many of them will be facing the question of how to receive the payout from their pensions. There are usually two options they can take. The first being to receive the full pension amount per month. The other to receive a partial amount per month, with the remaining being held back so that when the pension receiver dies the spouse can still receive a portion of the pension. The second option poses a major risk because if the spouse dies before the pension receiver then they took the partial pension option for no reason, worse still if the spouse out lives the pension receiver by a long time the reduced amount they receive may not be enough to sustain them.

Something to consider when looking at these options is to instead take the full pension option and get a life insurance plan on the pension receiver. This offers much more flexibility and control over your money. With this option if the pension receiver dies first then the spouse will receive the death benefit and live off that, make sure the life insurance plan is of appropriate size. And if the spouse dies first, then the pension receiver has a choice. They can continue to keep the life insurance in force and change the beneficiary to a child or other family member. Or if they choose a life plan with a cash value they can withdraw the cash value and let the plan lapse. Either option gives you much more control of your money and gets the maximum amount from your pension fund.

Before you consider the idea of life insurance over your pension plan options you need to get a quote for life insurance. Life insurance premiums can vary significantly from person to person, and the only way to get a accurate idea of what you would pay is to talk to an agent, take the medical exam etc. There is also a possibility of not being eligible for life insurance if you have a preexisting condition or are in poor health. Life insurance can be a great alternative to taking a reduced pension payment but its not for everyone. I highly encourage people to consider it, but make the choice that best suits their needs.


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    • Moneyger profile image


      6 years ago

      Good information in helping to consider the options available and their benefits.

    • profile imageAUTHOR


      6 years ago

      Thanks for the comment! Your absolutely right, everyone needs to do there homework before making big decisions for retirement.

    • Dee aka Nonna profile image

      Dee aka Nonna 

      6 years ago

      Great idea to remind people to research, research, research and make the best decision for them. Far to often people make decisions without considering all the options available. Voted up and useful


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