Life insurance that has a cash-value (i.e. whole or ordinary life) feature comes up short. It provides an insufficient amount of death proceeds and an insufficient amount of long-term savings.

Why? A portion of the life-insurance premium is used for pure protection (term) and the rest of the premium is used for savings. These two parts make up a cash-value policy.

That said, long-term public employees (those who expect to collect their pension) should buy outside term insurance to augment the death benefit their union/employer/retirement system provides. The employer-sponsored voluntary retirement savings plan i.e. 457(b), 401(k), 403(b), 401(a), IRA should be used to augment their future defined-benefit pension income and their future defined-benefit Social Security annuity income.

In my view, the plan is quite clear: While working and raising a young family, the chief bread-winner piles up on term life insurance and contributes the maximum allowed to their favorite retirement savings account. Once retired, the term life insurance can be substantially reduced or cancelled altogether because you are now collecting your two guaranteed lifetime pensions: A city or state pension and Social Security. And if you follow my advice you have a seven-figure balance (at least $1,000,000) in your favorite savings/investment account.

I also recommend you buy a private disability policy while working to augment any disability income you might be entitled to from your union, retirement system or Social Security. Like term-life insurance, the disability-income policy can be cancelled when you retire.

Mr. Frank is a fee-only Retirement Financial Planner and a retired city high school Teacher of Accounting. He can be reached by phone at (732) 536-9472, or via email at

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