Pensions were once the backbone of America’s working-class retirement portfolio. But with the rise of the 401(k), many employers are now foregoing traditional forms of retirement planning in favor of market-driven alternatives. Indeed — even as America’s population boomed between 1975 and 2019, the total number of workers participating in private sector pension plans collapsed from 27 million to just 13 million.

Pensions are still overwhelmingly popular with American workers. A recent survey revealed that 2/3 of respondents prefer a traditional pensions as a means to “help workers achieve a secure retirement.” That’s probably because pension plans provide a guaranteed, predictable monthly retirement benefit. You know exactly how much you’ll be getting for years in advance, giving you plenty of time to plan out your retirement and even budget a little extra.

Meanwhile, a 401(k) or Individual Retirement Account (IRA) will rise and fall depending on where the broader market is at, leaving you guessing exactly how much income you’ll have each month. Pensions plans are still popular in many public sector jobs, where unions have spent decades fighting to preserve workers’ access. But even there, workers are faced with a tough choice…

You see, plans typically offer payouts based on either a “Single Life” or “Joint Survivor” basis. As the name implies, “Single Life” payouts continue throughout the lifetime of the employee. Meanwhile, “Joint Survivor” payouts continue after the death of the employee, with a named beneficiary receiving a steady cash income for a prescribed period of time.

In other words; a worker can take a larger cash payout from his pension plan throughout his whole retirement … or he can take a smaller payout during his lifetime, in exchange for the promise that his pension will help take care of his loved ones after he’s gone. This is a really interesting feature of pension funds … but if you’re like most Americans, and you don’t have a pension, then you’ve likely never even heard of it…

Yet it’s also just a great example of how pensions are really designed to give workers options — even going so far as providing a “life insurance-like” death benefit through Joint Survivor payouts. Most workers are surprised to discover their employers even offer that kind of protection. Donald was certainly surprised by his pension plan when we first met via Zoom call a few years back…

Donald was an old friend of mine who moved to Texas and became a “roughneck,” an oil industry worker. He was an extremely hard worker, quickly climbing the ladder with a hard-won income that was well into six-figure territory. Not yet 30 years old, Donald was already a father of four who hated spending money and couldn’t bring himself to trust the stock market. Considering that he grew up between the dotcom crash and the financial crash of 2008/9, it was hard to blame him.

But Donald suddenly found himself at an impasse. His latest raise had come with pension benefits, and he was now stuck with the choice between Single Life and Joint Survivor benefits. Donald had done his homework, so he knew that Single Life provided the greatest total payout.

At the same time, he knew he was working in a dangerous industry. So he appreciated the peace of mind that came from knowing his young family would be taken care of, no matter what. And he was still trying to weigh the benefit of that guaranteed protection compared to the larger overall payout from Single Life. So I asked him, “why settle for a ‘life insurance-like’ benefit? Why not just get whole life insurance?”

Obviously, I’m a little biased in favor of life insurance. But in Donald’s case, it made perfect sense. He was still relatively young, he had a substantial and predictable income. And he was interested in dedicating a portion of his income to an asset that would give him sweeping protection and peace of mind rather than chasing the highest possible return.

A well-funded, well-rounded whole life insurance policy provides a whole world of benefits. And for Donald, one of those benefits was to take his toughest pension choice off the table. With life insurance, pension recipients have a dedicated asset for ensuring his family’s future well-being, so they could opt for the higher Single Life payout without a concern.

The synergy between pensions and whole life insurance doesn’t stop there, either… Many of the types of jobs that still offer pensions — particularly public sector jobs and unionized work — offer remarkably stable employment. Future pension recipients typically have more predictable income streams, which really gives you the freedom to plan out years of spending in advance, comfortably funding a much larger benefit for your family.

It’s also no secret that public sector employees don’t exactly earn the highest wages. With a well-funded whole life insurance policy, you can take loans out against the cash value of your policy to cover everything from a new car to a new home.

These loans typically come with a lower borrowing rate and a much more lenient repayment schedule than a typical bank loan, allowing you to save a noticeable amount of money on those big purchases (especially the unexpected ones). You could even use loans against the cash value of your whole life insurance to bridge the gap into an early retirement—especially if you’ve outgrown the need for your insurance coverage. Other options like reverse mortgages become more viable when you’ve got a paid-up whole life insurance policy.

These loans are also not generally recognized as income, so they’re not subject to taxes like your pension income. Pensions also don’t have the best record of keeping up with inflation during some periods, while whole life policies grow predictably over time.

In essence, a young worker like Donald can count on his pension for predictable, steady payouts … while using his whole life insurance to predictably, steadily grow his wealth—then provide his heirs with a liquid, tax-free inheritance.

Key Takeaways

• Pensions provide predictable, guaranteed lifetime income but often require choosing between higher individual payouts (Single Life) or smaller payouts with survivor benefits (Joint Survivor).
• Whole life insurance can complement a pension by providing dedicated death benefits, allowing policyholders to select the higher Single Life pension payout without sacrificing family protection.
• Whole life insurance cash value loans offer flexible, tax-efficient liquidity for major expenses or early retirement, often at better terms than traditional loans.
• Combining pensions with whole life insurance helps build continuity of wealth, risk protection, and predictable growth even in unstable market conditions.
• Stable public sector or union jobs with pensions create an ideal environment for leveraging life insurance to fund family benefits and long-term wealth planning.
• Building wealth intentionally through insurance and pension strategy mitigates risks associated with market volatility and inflation affecting retirement income.

Ready to see how this could apply to your wealth plan? Click the big yellow Clarity Call button and let’s map it out together.