Life Insurance Replacing Spousal Pension

**Financial Consideration: Evaluating Life Insurance versus a Spousal Pension Election Option**

**The Case for Choosing Life Insurance Over a Spousal Pension**

For married individuals facing pension decisions, opting for a spousal benefit can often lead to a significant reduction—potentially up to 25% or more—in monthly income, depending on the selected option. It is not uncommon for this arrangement to leave the spouse with only a portion of the already diminished pension payment.

Selecting a spousal pension benefit may also result in a long-term financial commitment: if you outlive your spouse, you will be receiving a reduced pension for the duration of your life without any additional benefit for your loved one, as no one would be left to claim it. Furthermore, this election typically does not provide any residual benefit for other family members.

Life insurance emerges as a strategic alternative to receiving a spousal pension check. A life insurance death benefit can offer your spouse a financial cushion that they can either convert into a lifetime income in the event of your passing or designate to other beneficiaries should the unexpected occur.

**Key Considerations for Implementing This Strategy:**

– The monthly premium for life insurance can often be funded by the difference between the single pension option (providing a higher monthly income) and the spousal benefit option (which delivers a lower payment). In many cases, the cost of necessary life insurance is substantially less than this income disparity, ultimately resulting in increased net income after covering the insurance premium.

– When assessing life insurance as a pension replacement strategy, it is advisable to consider a combination of permanent and term life coverage for cost-effectiveness and comprehensive protection.

– It is recommended to explore this pension replacement strategy approximately 4 to 6 months prior to your anticipated retirement date. While some individuals may initiate this process years in advance, securing life insurance approval and activating the policy before foregoing the spousal pension option is essential.

By carefully evaluating the role of life insurance in your retirement strategy, you can achieve greater financial security and peace of mind for both yourself and your loved ones.

Before finalizing your spousal pension election, it may be worthwhile to explore whether life insurance could serve as a more advantageous option for your family.

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*The information provided in this section is intended for general guidance, as the details and guarantees of fixed annuities can differ from one contract to another. Please consult your agent and company materials regarding each specific contract.

See our Professional Disclaimer.