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.

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