A:

In most cases, an individual with a pension plan should have the option to leave at least a portion of his or her pension to a surviving spouse and/or child. Oftentimes, this can be done by purchasing an option on the pension plan. However, depending on the specifics and conditions mentioned in the plan, the cost in implementing such a measure will be in the form of reduced benefits for the surviving spouse.

One example would be a defined-benefit pension with joint and survivor options. In this case, the surviving spouse would be entitled to at least half of the benefits that were originally given to the couple. In a regular defined-benefit pension plan without options, benefits stop once the individual passes away, which means that benefit end sooner. The plan with joint and survivor options assumes that one member of the couple will survive; therefore, both types of pensions are designed to pay out a similar amount over time, which is why the monthly amount paid out on the pension with joint and survivor options is lower.

For related reading, see Pension Law Could Reduce Your Payout.

RELATED FAQS
  1. The company I am receiving my pension plan from has just filed bankruptcy. Could ...

  2. What can you do with your pension if you leave the employer and can you borrow money ...

    I am planning to leave my job that I have worked at for 8 plus years and I just received a notice about a pension that I ... Read Answer >>
  3. What will happen to my father's pension if he never added a second beneficiary?

    My dad worked at a company for 40 years where he had a pension. My mom passed away about a year after ... Read Answer >>
  4. Can I draw out or sell my straight life annuity?

    I have a pension plan through PBGC. I have my benefits form that shows how much I can draw. I am retired and disabled. What ... Read Answer >>
  5. Can I receive my deceased mother's pension?

    My mother just passed away at age 69. She was supposed to receive her pension starting at age 70 1/2. The company says it ... Read Answer >>
  6. Who bears the investment risk in 401(k) plans?

    Who actually bears the investment risk in a pension plan depends on the type of pension plan that is employed. In a broad ... Read Answer >>
Related Articles
  1. Retirement

    Pension Plans: Pain Or Pleasure?

    Employees have a love/hate relationship with this retirement option.
  2. Retirement

    The Pros And Cons Of Pension Maximization

    Pension maximization can be an effective solution to the single versus joint life payout dilemma that many retirees face. But, there are several factors, such as tax and investment matters, that ...
  3. Retirement

    7 Signs Your Pension Fund Is In Trouble

    Even if you're lucky enough to have a pension plan, you can't assume it'll pay out.
  4. Retirement

    New 401(k) Pension Rollover Rule: Pros and Cons

    Is the new rule allowing participants to roll their 401(k) balances into pensions a good idea?
  5. Retirement

    How Safe Is Your Pension?

    A 2014 law permits some private pension plans to reduce benefits. How to figure out if your retirement income is endangered.
  6. Retirement

    A Primer On Defined-Benefit Pension Plans

    Most of us will rely on a pension plan in the future, so it's best to know the details of the various plans before signing up.
  7. Financial Advisor

    How to Advise Clients with Frozen Pensions

    Financial advisors are on the front line in advising clients impacted by a frozen pension. Here's what they need to consider.
  8. Financial Advisor

    Pension Advances: What You Should Be Wary Of

    The terms some pension advance firms require can be costly. Here's how to be sure your clients aren't making bad decisions.
  9. Retirement

    America's Frozen Pension Dilemma

    Unfortunately, there are several factors that have eroded the presence of pension plans in America, and workers need to be prepared to replace that expected income for their retirement years. ...
  10. Retirement

    How Pensions, Social Security Differ

    Both pensions and Social Security provide an income stream to retirees, but they differ widely on how they're structured and funded. Here's the lowdown.
RELATED TERMS
  1. Pension Option

    A set of options that a pensioner has in regard to the handling ...
  2. Pop-Up Option

    A joint and survivor pension option, generally limited to married ...
  3. Pensionable Service

    The period of service, expressed in a yearly figure, for which ...
  4. Pension Adjustment Reversal - PAR

    A numerical calculation in certain Canadian pension plans that ...
  5. Unfunded Pension Plan

    An employer managed retirement plan that uses the employer's ...
  6. Fully Funded

    A pension plan that has sufficient assets needed to provide for ...
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center