When you retire, your plan asks you to choose how your pension will be paid. It is one of the few retirement decisions you cannot change later, and it decides what your spouse or other beneficiary receives after you die.
The common options
Single life, or maximum. The highest monthly amount, paid for your lifetime only. Payments stop when you die, apart from any leftover contributions some plans refund.
100% joint and survivor. A lower monthly amount for life. After you die, your beneficiary receives the same amount for the rest of their life.
50% joint and survivor. A smaller cut to your check. Your beneficiary receives half your amount after you die. Some plans also offer 75% or 66⅔%.
Pop-up. A joint option where your check returns to the single-life amount if your beneficiary dies before you. It costs slightly more than the matching plain joint option.
Period certain. Payments for life, with a guarantee of a minimum number of years, such as 10 or 15. If you die early, your beneficiary receives the rest of the guaranteed payments.
What survivor protection costs
The reduction depends on your age and your beneficiary’s age, because the plan expects to pay for longer when the survivor is younger. For a retiree and spouse of similar age in their early sixties, typical reductions look like this.
| Option | Typical reduction | $3,000 single-life pension becomes |
|---|---|---|
| Single life | None | $3,000 |
| 50% survivor | About 5% to 8% | About $2,790 |
| 100% survivor | About 10% to 15% | About $2,625 |
A spouse ten years younger makes the joint options more expensive. A spouse older than you makes them cheaper. Your plan’s estimate shows the exact figures for your ages.
How to choose
Start with what your spouse would need if you died first. List their income without your pension: their own pension, Social Security, savings and any life insurance. If that covers their costs, a smaller survivor option or even single life may be enough. If your pension is the main income, a 100% option protects them.
Since the Fairness Act, a surviving spouse of a public worker can collect a Social Security survivor benefit without the old GPO cut. For some couples that makes a 50% option enough where they once needed 100%.
Health insurance matters too. In many plans, a surviving spouse keeps retiree health coverage only if they continue to receive a pension. Check this before choosing single life.
Pension maximization
Insurance agents sometimes suggest taking single life and buying a life insurance policy to protect the spouse instead. This can work when the spouse is in poor health or the policy is cheap, but it often costs more than the survivor option once premiums are counted, and the protection ends if premiums stop. Compare the monthly premium with the monthly pension you would give up, and treat a sales pitch with care.
Before you sign
Ask your plan for an estimate showing every option at your actual retirement date. Confirm what happens if your beneficiary dies first, and whether you can change beneficiaries after a divorce. Most plans need your spouse’s written consent to pick anything other than a joint option.