FRS Pension Option 1 / Pension Maximization

When you retire from the Florida Retirement System you have 4 pension payout options, the investment plan option, and a hybrid option to chose from. Let’s go over option 1.


Option 1 is for the retiree’s lifetime only. If the retiree dies, then the pension checks stop, but because of this risk it is usually the highest paying pension option. While most people think that this option is primarily for people who are single or have longevity in their families, it’s also a good option for people who want to leave assets to someone other than their spouse.


People who are healthy before they retire or enter the FRS DROP program will sometimes take the difference between option 1 and the reduced option 3 and buy a life insurance policy with it. This technique is commonly referred to as “pension maximization”.


Life insurance has some unique benefits over a reduced pension option:

  1. You can leave it to whomever you’d like
  2. Term and Guaranteed Universal life insurance policies have level premiums. If you have a COLA on your pension, then the cost of options 2-4 actually increase every year. Example: If your COLA is 3% and the reduction for option 3 is $400 per month, then in 24 years you will be receiving $800 less than you would have with option 1.
  3. You can stop paying the premiums if something happens to your spouse
  4. If your spouse does inherit the life insurance, but doesn’t outlive you by much then the remainder of the balance goes to their beneficiaries
  5. Your DROP payout will be higher


The major downfalls of “pension maximization” are:

  1. You need to qualify for life insurance
  2. If you fail to pay the premiums the life insurance may lapse
  3. Your beneficiaries could outlive the money if it’s not managed correctly


If you’d like to learn more about the FRS Options or pension maximization feel free to contact our office at (888) 960-4494 or


*Guarantees mentioned herein are backed by the claims-paying ability and financial strength of the issuer.