Aging Options

Your decision about pension survivor benefits may harm your spouse's future

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If you retire with a pension…congratulations.  Less than 22 percent of Americans in the private workplace still get pensions but many government employees still get them.  If you’re married when you or your spouse retires and one of you is eligible for a pension, you’ll have to make some decisions.

There are two types of pension benefits.  They are: Single Life Benefit and Joint & Survivor Benefit.

A Single Life Benefit pays a higher benefit but only covers the lifetime of the person who earned the benefit.  Benefits are paid out based on the beneficiaries expected lifetime and cease when the beneficiary dies.

A Joint & Survivor Benefit is a smaller check that covers both spouses.  This check is based on both your life expectancy and your spouse’s life expectancy.  Should the worker with the plan die, his or her spouse will continue to receive benefits.

By law, plans must offer the spouse a lifetime annuity.  Declining the spousal annuity requires a waiver.  This federally required form lets you and your spouse know that the survivor will be without pension benefits if the worker dies.  State and local government pensions are not required to have the form.  Once it is signed, your decision is final.  As with all legal documents, don’t sign unless you understand just what you are signing away.  Invest in a conversation with a financial planner or Elder Law Attorney.  Doing so may prevent a significant amount of stress down the line.

So, how do you decide which option works best for you?  You start by adding up your retirement income to estimate what benefits will be available to the survivor, look at your health and other circumstances that might change as you age and then determine how important a survivor’s benefit will be to whichever one of you remains after the first of you passes.

Read this article from AARP to find out what other decisions may financially harm the surviving spouse.


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