Today, many people are living longer and when a spouse dies, the survivor will often benefit if they can get part or all of their spouse’s retirement income. The question is if that is possible. Many people are wondering how to get the spouse pension after death and how are the funds dispersed.
What Happens To Someone’s Pension When They Die?
The good news is that in the last couple of years there have been significant changes in the law that allow for more choices by the remaining spouse and how they will receive the benefits provided by their deceased spouse’s pension. The bad news is that some of those decisions are complicated and could affect other family members that remain after the living spouse passes away.
Types Of Withdrawals
Drawdown gives the living spouse the ability to keep their spouse’s pension invested and to withdraw as much as 25% up front that is tax-free. The living spouse can take more, but any over that amount is taxable.
Lump Sum amounts can be withdrawn anytime, and as long as they are with-in the 25% limit then each is tax-free. The spouse can withdraw amounts over that but the additional amount will be taxed.
One of the issues with these types of plans is they do not guarantee the recipient that they will have income available for their lifetime. They can choose how and when they withdraw it but if the money runs out then that is all there is and no way to get more from that source.
Is There A Way To Have Guaranteed Income For Life?
Annuities are investments that guarantee an income for life. They are set up by insurance companies. It is possible to buy them through a broker or bank but only an insurance company can underwrite them. The law requires they have funds set aside to ensure payments can be made regardless of whether investments are up or down.
The government guarantees those up to certain amounts. It is rare for these types of investments to fail, but up to the amount the state guarantees are protected even then. The upside is that these investments provide guaranteed income for life. The downside is they require the spouse to use the retirement fund to invest in the annuity and will no longer have any access to that money over and above the monthly guarantee they have. Often, the spouse can withdraw up to 25% of the pension before securing an annuity.
In almost every case, the living spouse will qualify to get their spouse pension after death. It will be very important for the living spouse to get professional help in making the best decision for how to receive payments from that pension.
Most elderly people who are facing this issue already have the stress of losing their spouse. That reason alone is enough to seek professional assistance. But now with the new laws making more choices available, it is even more imperative that the spouse consults with someone who can help them navigate their choices for the best outcome.