Pension Maximization Strategy for Married Retirees: Get More Income and Protect Your Spouse

Pension Maximization Strategy for Married Retirees: Get More Income and Protect Your Spouse

If you're approaching retirement with a pension, you may already be weighing one of the most important financial choices of your life: Should you take the highest monthly payout that ends when you die, or accept a reduced monthly benefit that continues paying your spouse after you're gone?

For many married retirees, that second option, the “joint-and-survivor” payout, feels like the safest route. But it also comes at a cost: a lower monthly income for the rest of your life. Fortunately, there's a lesser-known approach called pension maximization that may allow you to have your cake and eat it too.

What Is Pension Maximization?

Pension maximization is a strategy that allows you to take the maximum lifetime income (the single-life option), while still protecting your spouse’s financial future using life insurance.

Here’s how it works: instead of choosing a reduced joint-and-survivor benefit, you take the full pension payout and use part of that increased income to purchase a life insurance policy. If set up properly, the tax free death benefit from the policy can provide your spouse with equivalent, or even better protection than the joint payout would have.

This strategy has gained popularity among financially savvy retirees who want higher income today without compromising long-term security for their family.

A Common Pension Dilemma

Let’s say your pension offers you $4,000 per month under the single-life option. If you opt for the 100% joint-and-survivor payout, your benefit might drop to $3,000. Over a 20-year retirement, that’s a $240,000 difference.

Instead of forfeiting that income, you could keep the $4,000, allocate a portion, say $300–$500 per month, toward a permanent life insurance policy, or $100-$300 per month toward a term life insurance policy, and ensure your spouse still receives financial support if you pass away first. You preserve income now and still provide protection later.

Watch This Video To Learn More

To help visualize, I've included this quick video on the topic.

When Pension Maximization Makes Sense

Pension maximization can be a smart solution, but it’s not one size fits all. The strategy works best when you or your spouse are in good health and can qualify for a cost effective life insurance policy. It's also ideal when the reduction in income under the joint option is substantial, giving you enough “room” to fund the policy without strain.

You also have to weigh whether your pension includes benefits beyond just income, like retiree health coverage or survivor benefits that could be lost by opting for the single-life payout.

Bottom Line

Pension maximization is about control. It allows you to increase your monthly income while creating a flexible, tax-efficient way to protect your spouse. But this isn’t a strategy you should pursue casually. You’ll need to model different payout scenarios, factor in your health and insurability, and work with an advisor who understands both retirement income and insurance design.

If you’re nearing retirement and want help exploring how pension maximization could fit into your broader retirement plan, fill out the form below and we will be in contact with you.