Maximize Your Pension with Life Insurance – A Complete Guide

pension maximization life insurance

Pension maximization uses life insurance to maximize your pension benefit in retirement.

You get the maximum benefit now from your company, and your spouse receives a life insurance death benefit should you die.

While pension max sounds great (and can be), you must weigh the pros and cons before choosing this option.

At RiskQuoter, we tell you everything you need about pension max.

Single Life vs. Survivor Benefits: Making the Crucial Choice

When you retire with a pension, you have a choice to make:

Single Life Benefit – You get the maximum monthly benefit now, but that benefit ends when you die.


Survivor Benefits – You receive a lesser monthly benefit, but your spouse will continue to receive a monthly pension if you die before them.

And the difference between those two payouts can be significant!

Pension Max Tip #1

The life insurance application process takes time, so you realistically need about 8 weeks before your deadline to choose your pension option.

How Life Insurance Works in Pension Maximization

Congratulations! You made the decision to retire.

And if you have a pension, you have a really important decision.

Do you choose the Single-Life Payout Option or the Joint-Survivor Payout Option?

Pension plans must pay a joint-survivor benefit unless that spouse signs a spousal consent or waiver form.

Pros and Cons of Single Life vs. Joint Survivor Pension Benefits

Payout Option
Payout Option
PROSPays the highest monthly benefit to you for as long as you live.Pays a monthly benefit to you for as long as you live. When you die, your spouse will continue to receive a monthly benefit payment.
CONSWhen you die, benefits stop, leaving your spouse with nothing.The monthly benefit received when both spouses are living is significantly less than the Single-Life option.

Calculating Life Insurance Needs for Pension Benefit Replacement

How much pension max life insurance do you need?

Calculating Your Pension Maximization Needs: A Step-by-Step Guide

  • Your current age
  • Retirement age
  • Your life expectancy
  • Your spouse’s age
  • Your spouse’s life expectancy
  • Monthly pension benefit if you elect the maximum pension
  • Monthly pension benefit if you elect joint & survivor benefit

Pension Max Tip #2

Pension maximization must make several assumptions about your life expectancy, your spouse’s life expectancy, inflation, investment returns, and life insurance costs (before approval) to compare single to joint benefits.

Assumptions include:

  • Life Expectancy – How long are you and your spouse going to live?
  • Inflation Rate – What inflation rate do you expect now and in the future?
  • Investment Rate of Return – What rate of return is reasonable if you invest the life insurance death benefit?
  • Life Insurance Cost – You won’t know your rate until you get approved for coverage.

Here’s an example:

Suppose you are a 65-year-old male, retiring from the police force, and the life insurance needed is $250,000.

The Social Security Administration says your life expectancy is 18.09 years.

Questions you need to think about include:

  • How’s your health?
  • What does family history longevity look like?
  • Do you buy life insurance to cover the 18.09 years?
  • Or do you want a cushion if you and your spouse live longer?
  • Do you buy a policy that lasts as long as I live or a term policy?
  • Should you consider getting both the term life and universal or whole life?

More on this in a minute, as your health is a factor when buying pension max life insurance.

Pension Max Tip # 3

Another potential benefit of using life insurance to replace a pension is that you can purchase life insurance that includes long-term care insurance benefits or riders.

Factors Affecting Pension Max: Your Health, Age, and Life Insurance Cost

The more significant your health issues are, the more expensive life insurance will be.

At some point, the cost of life insurance may make pension maximization less attractive than the survivor benefits option.

We can look at your existing group life insurance if needed, but given the price when you leave, it is not usually an excellent option either.

Here is an example of life insurance pricing based on various underwriting rate classes. After this chart, you’ll find examples of how certain health conditions are typically underwritten.

Male Age 65 – $250,000 of coverage – Monthly rates for a non-smoker – rates as of 5/15/2024

Underwriting20-year term25-year termLifetime
Preferred Best$195$346$478
Standard Plus$288$416$596
Table 2 Rating$429$773$920
Table 4 Rating$769$1030$1226
Table 6 Rating$961$1288$1533

Female Age 65 – $250,000 of coverage – Monthly rates for a non-smoker – rates as of 5/15/2024

Underwriting20-year term25-year termLifetime
Preferred Best$134$277$400
Standard Plus$187$346$491
Table 2 Rating$348$647$759
Table 4 Rating$464$692$1012
Table 6 Rating$580$1078$1265

Some examples of health conditions and their typical underwriting outcome:

  • Preferred Best – About 10% of the population get this rate at the age of 65
  • Preferred – No history of health issues other than blood pressure and cholesterol
  • Standard Plus – BMI – low 30’s, type 2 diabetes with 7.0 A1C, sleep apnea,
  • Standard – BMI above 35, stage 1 cancers – melanoma, thyroid, prostate
  • Table 2 – Type 2 diabetes w/ 7.1 – 8.0 A1C, single vessel stent, TIA history
  • Table 4 – Cardiac bypass history, type 1 diabetes controlled, combinations of impairments
  • Table 6 – More significant cardiac, hepatitis, and combinations of impairments

As you can see, your health will be a critical factor in determining if pension maximization life insurance is right for you.

Choosing the Right Coverage for Pension Max: Term, Universal, or Whole Life

You have a choice of pension maximization products, including:

  • Term Life Insurance
  • Universal Life Insurance
  • Whole Life Insurance

Each type of life insurance product has its advantages and disadvantages.

Term Life Insurance

In today’s marketplace, a 65-year-old can get a 20 or 25-year term policy, and a 67-year-old can get up to a 22-year term life insurance policy.

The Pros of term life insurance for pension maximization are that it offers the least expensive pricing compared to universal or whole life insurance.

The Cons of term life insurance for pension maximization is that pricing will increase at the end of the term period.

And if you outlive your term and your spouse still needs the pension when you die, they can end up as a GoFundMe campaign.

And with some companies’ products, the death benefit decreases at the end of the term.

Universal Life Insurance

You can choose from cash value accumulating policies to no lapse guaranteed death benefit policies.

The Pros of universal life insurance for pension maximization is that you can get a policy guaranteed to age 120.

The Cons of universal life insurance for pension maximization is that cash value accumulation policies may not be guaranteed.

You can run into problems in the future that require increased premiums.

Whole Life Insurance

Whole life insurance policies for pension maximization are available.

The Pros of whole life insurance is that you can buy a policy that may pay dividends in the future, helping to reduce your premium outlays in future years.

The Cons of whole life insurance for pension maximization is that dividends are not guaranteed.

You can end up with a policy that does not perform as projected and have to pay additional premiums into your policy.

In addition, you can set up the policy so that the death benefit proceeds are paid out over time if that makes better sense for your situation.


You have questions about pension maximization for life insurance, and we have the answers!

Weighing Your Options

Pension maximization is excellent if the numbers make sense for your situation.

We can help you with your pension max questions.

We’ll explain the options available and provide guidance on making an informed decision.

With our service, there is never any pressure or obligation.

Final Thoughts

Ready to maximize your pension benefit?

Submit your request today for a free consultation.

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