Your Financial Future:
Pensions And Survivor Benefits
If you are married when you retire, and either you or your spouse has a traditional defined-benefit pension, you will face some choices when you retire and apply for benefits. The following information will help you understand the choices and how they will affect your retirement benefit payments.
What Are Survivor’s Benefits?
A defined-benefit pension can be paid in several different ways. When you or your spouse retires, you will be asked to elect or choose the type of benefit that you want.
This Fact Sheet focuses on two types of benefits:
- Single Life Benefit: monthly payments based only on your expected lifetime, which means the benefits stop when you die.
- Joint and Survivor Benefit: monthly payments based on you and your spouse’s lifetime. This means that should your spouse die before you do, you will continue to receive survivor’s benefits from your spouse’s pension.
Defined Benefit Pension Plan: a pension plan that promises a certain benefit at retirement, usually calculated through a formula based on a combination of years of service and amount of pay.
Survivor’s Benefit: a benefit option that will let you continue to receive monthly benefits for the rest of you life from your spouse’s pension if your spouse should die before you.
Spousal Consent Form or Waiver: A form you are required by law to sign if you choose not to receive survivor’s benefits.
Why is There a Spousal Consent Form?
A survivor’s benefit is such an important benefit that you have to sign a waiver or spousal consent form in order to give up your right to your spouse’s survivor benefits.
- The waiver is required by federal law as a way of letting you and your spouse know that the survivor would be left without any income from that pension if the benefit is waived.
- Unfortunately, the law does not cover state and local government pensions.
- Be sure to read this form carefully. It can be confusing.
- Once you have waived the benefit, the decision is final. Don’t sign away your rights unless you understand what you are giving up.
How Do My Choices Affect the Benefits?
- Sometimes you have a choice of whether the surviving spouse will receive 50% or 75% of your benefit. There may be other choices. If so, make sure you understand what they are.
- If you choose the survivor’s benefit, it means that you will receive lower monthly benefits than the monthly benefits based on your lifetime alone. But, it guarantees a steady stream of income for two lifetimes – yours and your spouses.
- People are often tempted to select the lifetime benefit because it pays the highest monthly benefit – but remember it will be paid only while your husband is alive. And if the pension includes retiree health benefits, these may stop too if you are widowed.
- Ask the pension plan administrator how much you would get under each option or type of benefit that you can choose.
If you and your spouse choose to receive his pension as a lifetime benefit, while your spouse is alive, you and your spouse might receive $1,600 a month in pension benefits. It would stop when he dies.
Under a joint and survivor annuity, the benefit might be $1,300 a month while your spouse is alive. However, when he dies, your benefit would be $650 a month for as long as you live.
How Do You Decide Which Benefit to Choose?
Start by listing and adding up all of your sources of retirement income. Try using WISER’s worksheet Get Your Ducks in a Row which can help you and your spouse:
- Estimate what benefits will be available to each of you as a widow or widower.
- Decide how important a survivor’s benefit is to each of you.
Although it is said that an individual needs 75% of the income of a couple to cover basic needs, everyone is different. Think about your personal circumstances and decide how much each of you would need as a widow or widower. Consider also how that might change if your health or other circumstances might change.