Choosing how and when to receive pension benefits


You usually have the choice of receiving payments for the rest of your life (a single-life annuity) or selecting from a variety of survivor options (joint and survivor annuity) that allow for your beneficiary to continue receiving payments after your death. If you choose payments for your life only, your monthly income will be higher.

The survivorship options result in a reduced payment. For example, you might qualify for a $1,500/month payment for the rest of your life, but if you choose the survivor option, your payment might be $1,000/month. That’s because the payment is now guaranteed to cover two lives. It should be noted that if you are married, the Internal Revenue Service requires that the benefit from a qualified retirement plan be paid out as a survivorship option unless both you and your spouse authorize another form of payment.

At first blush the survivorship benefit is the logical choice. After all, you want to make sure that your spouse is provided for after your death. But is that really the best decision? The answer, as with most financial decisions, is that it depends on your personal situation. There are times when it makes sense to take the single-life payout and times when the survivorship option is best.

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