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Most companies and government agencies offer options when you retire if you are married. Generally it goes something like this.

Option 1. Maximum payout. You can take $4000 a month on your retirement. It will remain at $4000 as long as you are alive. If you die and your spouse is still living the amount is cut down to $2000 a month and remains at $2000 for the rest of her life.

Option 2. Maximum survivor payout. You take $2800 per month and that remains level as long as either you or your spouse are alive.

The life insurance option. As long as you are in reasonably good health, take Option 1 and draw the maximum retirement. It puts $1200 a month more in your pocket. Buy a $500,000, 20 year term policy. In this example let’s assume that will cost about $3000 a year, or $250 per month. If you die your spouses income is cut back to $2000 from your retirement plan, but she has $500,000 income tax free with which she can buy an annuity that will pay a lifetime income roughly equivalent to the $2000 a month lost by choosing Option 1.

Remember, the older you both get the less it will take to purchase the life time income for your spouse. So, you might want to consider $400,000 or term and $100,000 of universal life.

Just a thought. I will visit this with more detail in the future.

This post is somewhat dated. Life insurance underwriting is changing and evolving continually. For more updated information check out some of the key word links. If you have a specific question or topic you need information for do a search. If you don’t find the answers you need contact me and we’ll make sure you get the information that is important to you.