Should You Take the Survivor Option on Your Pension?

In some cases, you could buy life insurance instead and get a better deal in protecting your spouse. There are some things to keep in mind, though.

An older man looks at paperwork and talks on the phone at home.
(Image credit: Getty Images)

Often, one of a client’s biggest goals is making sure their spouse is protected if they pass away. Choosing the best distribution option for your pension when you retire is an important decision. Many people think they should take the survivor option to make sure their spouse is left in the best financial position. However, if you get creative with your planning, you may be able to create a better outcome than just taking the survivor option.

Taking the survivor option means you have to pay for that benefit, which in turn means that you don’t get as much money from your pension while you are alive. For example, we had a client whose pension paid $5,000 a month for their lifetime. If they selected the survivor option (which would pay the spouse 50% of their pension for life), they would give up 10% of their pension going forward.

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Joe F. Schmitz Jr., CFP®, ChFC®
Founder and CEO, Peak Retirement Planning

As Founder and CEO of Peak Retirement Planning, Inc., Joe Schmitz Jr. has built a comprehensive retirement planning company focused on helping clients grow and preserve their wealth. Under Joe’s leadership, a team of experienced financial advisers use tax-efficient strategies, investment management, income planning and proactive health care planning to help clients feel confident in their financial future — and the legacy they leave behind. Joe has also written a book, titled I HATE TAXES. You can find Joe on YouTube by clicking here, where he creates educational videos for those in or near retirement. If you would like to talk to Joe’s team, you can schedule a meeting by clicking here.