ABA Family Legal Guide

The Rights of Older Americans

Pensions

Traditional Pension Plans

Do I get to choose how my pension will be paid to me?

Yes, to some extent.

The most common type of payment is called the joint and survivor annuity benefit. It pays the full benefit to a married couple until one dies, then pays a fraction of the full benefit to the survivor as long as he or she lives. The fraction typically is half or two-thirds. The Retirement Equity Act of 1984 requires this kind of disbursement unless the worker's spouse signs a waiver. The waiver permits payment of a higher benefit, but only as long as the retired worker lives. When he or she dies, the benefits end and the surviving spouse gets no more.

The joint and survivor annuity may allow you some options. You might be able to have benefits guaranteed for a certain number of years. For example, if the guarantee is for fifteen years, benefits would be paid as long as one or both spouses are alive. But if both die before fifteen years has passed since retirement, benefits would continue to be paid to their beneficiary until the fifteenth year. Other guarantees might be for longer or shorter periods; the longer the guarantee, the lower the benefit.

There are some other kinds of pension disbursements as well. One pays a fixed amount for a fixed number of years, which means you could outlive your benefits and get nothing in your oldest years. Another pays all your benefits in a single lump sum when you retire, which could cost you a lot in income taxes.