Q&A: Pension payout planning

Dear Liz: My husband and I each receive a pension from the companies where we worked. If my husband dies first, will his company continue to pay me his pension and vice versa?

Answer: That depends on how you chose to receive your benefits. Typically people are offered a choice of payouts: a “single life” option that ends at the pensioner’s death, and “joint and survivor” options that continue payments after the pensioner dies. A 50% joint and survivor option would pay half the monthly amount after the pensioner’s death, while a 100% option would continue the payments without reduction.

The option that continues payments without reduction, however, often offers the smallest monthly payment to start. The “single life” option pays the largest monthly amount, but the fact that the payments end at the first death can leave the survivor in a bad way.

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  1. Suzanne Rague says

    This person and her husband worked for corporations, which are required to obtain the spouse’s consent in writing to the pension option that was selected. They may not remember which option they selected. But signatures of both the employee and spouse were required on the pension election form. State and local governments vary on whether spousal consent is required when selecting a pension option.

    • Liz Weston says

      You would think so. I wrote about this last year, when a widow’s pension stopped and the pension company claimed it was single life only. Several readers wrote in that they had confronted similar situations and had to provide the company with the paperwork proving that the pension was actually joint-and-survivor. The pension companies have no incentive to keep the paperwork straight, so it behooves anyone choosing joint-and-survivor to keep careful track of the supporting documents.

    • Liz Weston says

      The people most likely to be in this situation, unfortunately, are also the least likely to be knowledgeable about taxes and Social Security coverage.