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Pension Question
Old 11-12-2006, 07:17 PM   #1
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Pension Question

What happens if someone dies before collecting pension. Does the pension now go to the surviving spouse? What happens if the individual dies while receiving pension but their spouse is still alive.? I am doing some financial planning and this answer will help me determine how much insurance I actually need. Thanks.
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Re: Pension Question
Old 11-12-2006, 07:22 PM   #2
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Re: Pension Question

It depends on how the pension is set up. With the one I receive, my spouse will get 50% of my amount when I die. There are others where the spouse receives nothing. Some give the couple the option to elect how much the spouse will get when the primary beneficiary dies. You need to get this info from the pension provider so that you can make a good decision.
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Re: Pension Question
Old 11-12-2006, 11:29 PM   #3
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Re: Pension Question

With the pension plan that I pay into, if the person dies before collecting any pension, the survivng spouse receives a lump sum refund of the money that their now-deceased better half payed into the plan PLUS interest. If the person retires and starts collecting the pension, and then dies, the spouse receives a monthly "spousal pension" eqaul to 50% of dead spouse's pension (for the rest of his/her life).

If the employee's spouse dies prior to the employee collecting their pension, or if the employee and his/her spouse divorce at least 365 days prior to the employee collecting their pension, then upon the employee's retirement, the employee will receive their usual pension PLUS a refund of the amount that was paid into fund the spousal pension PLUS interest. (Ex-spouse receives NADA...NOT a darn thing IF divorce was 365 days or more prior...if divorce was less than 365 days prior, ex-spouse receives the same as if married) This lump sum refund also applies to the employee who has remained unmarried.

I fall into that last category....unmarried....therefore I will receive my full pension PLUS the refund of the amount that was paid into fund the spousal pension PLUS interest. That amount in my case is about $15,000. Of that amount, I will pay about $9,500 to purchase an additional 5 years service credit in the pension, $5,000 will be rolled into an IRA ($4,000 regular contribution & $1,000 'catch-up' for being age 50), and $500 will be taxed at 20%.....leaving me with $400 to throw my retirement party!!!!

OR I may just take that $5,000, screw rolling it into an IRA, let them have the 20% in taxes, leaving me with $3900....and throw one HELLATIOUS retirement party....a.k.a. = Screw everybody, I'm going to the Bahamas to celebrate!!!
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Re: Pension Question
Old 11-13-2006, 09:55 AM   #4
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Re: Pension Question

Thank you so much for the replies. I do not pay anything into the my pension so the company funds it all. Does that make a difference? In other words, if I did not pay anything into it, would my spouse be entitled to anything?
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Re: Pension Question
Old 11-13-2006, 10:14 AM   #5
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Re: Pension Question

Quote:
Originally Posted by ADJ
Thank you so much for the replies. I do not pay anything into the my pension so the company funds it all. Does that make a difference? In other words, if I did not pay anything into it, would my spouse be entitled to anything?
Not necessarily. Most pension funds have it set up to benefit the spouse/partner if you die. You really need to check with your staff benefits people.
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