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Gregory S. DuPont Oct. 1, 2018

Retiring well is the best reward for a lifetime of hard work. But a successful retirement doesn't just happen-it is the result of careful planning.

At retirement, your monthly pension and Social Security benefits combined, probably won't equal your last monthly paycheck. Therefore, you will need to get the most out of your pension plan and plan early for the future needs of your spouse and family, as well.

Imagine this scenario: You are about to retire, and you are offered either a pension of $2,500 per month for your life, or $2,000 per month for the lives of you and your spouse. Even if both you and your spouse work, you might suppose that having two pensions are enough. However, because of the difference in earnings over the years, one spouse is in danger of being left without enough income to maintain his or her accustomed lifestyle. In many cases, both spouses have taken a double pay cut to leave ongoing income to the other. You may think there is no choice, but it is possible to maximize your pension benefits and still provide retirement income for a surviving spouse.

One possible way to be certain you can take the higher monthly pension (i.e., $2,500 per month vs. $2,000 per month) is to purchase life insurance which will provide a death benefit that can help supplement retirement income for your surviving spouse. This provides several benefits:

  • It allows you to take the higher monthly income from your pension

  • In some cases it creates a cash reserve that is available for emergencies

  • It may be less expensive than a joint annuity

  • It can pay you benefits in a lump sum or on an "as needed" basis.

In any event, it is wise to plan early because purchasing insurance becomes more expensive the longer you wait. If you are a number of years away from retirement, or if you are approaching it fairly soon, you may choose to consider purchasing the amount of insurance necessary to cover a retirement contingency.