How to Choose a Pension Option
Pension benefit options are benefit options that refer to payment options from your pension plan. With pension plans, there are several types of payment options you can choose. You must think very carefully about your pension payment option if you're married, because your choice will impact whether your spouse receives anything or not when you die. If you don't have a spouse, then your choice will be driven primarily by what gives you the most benefit during your lifetime. There are four pension options common to pension plans. You may choose from a lifetime pension payment, a 50 percent reduced pension, a 25 percent reduced pension and a lump sum pension payment.
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Instructions
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Gather your pension benefit statement and forms. All pensions have pension plan statements and paperwork you must file to receive your pension benefits. This paperwork details the terms of the payments and the options available to you. You should review the paperwork carefully and make sure you understand all of the options available to you.
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Discuss your pension options with your spouse, if you have one. You have several choices open to you. A full pension benefit means you take all of your pension benefits as monthly payments. Your spouse will get nothing if you predecease her. A reduced pension option allows you to leave either 25 percent or 50 percent of your pension benefit to your spouse. You must take a reduced pension benefit during your lifetime to pass on some of your pension to your spouse. Finally, you may elect to take a lump sum pension benefit. The lump sum amount gives you a lump sum of money that represents your total lifetime pension benefit. If you do not have a spouse, then determine which benefit option is the most beneficial for you. You won't need to worry about the reduced payment options, since you don't have a spouse. Instead, decide whether you want more or less control over the investment options of your pension. If you want higher payments than what the pension plan will give you (and if you think you can invest the proceeds of your pension appropriately to achieve that goal), then take the lump sum payment. If you are not confident in your investment abilities or are not interested in managing the investments yourself, then choose the lifetime payment option.
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Fill out the paperwork to receive your benefit payment. Have your spouse sign the spousal waiver that is required if you are not choosing a reduced benefit option. If you do not have a spouse, then fill out the paperwork for yourself and ignore the spousal paperwork. Regardless of whether you have a spouse or not, don't forget to choose a direct deposit option if you want the pension payment deposited directly into your bank account instead of receiving a check every month. Turn all of your paperwork into your human resources department. They will process the paperwork for you and you will receive your first pension payment within 30 days of your scheduled retirement.
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Tips & Warnings
If you have a spouse, you should choose the pension benefit that benefits both you and your spouse. If your spouse would need money after you die, then consider the reduced benefit. However, the best option may be the lump sum benefit payment. This is because you get to control how pension benefits are paid out. You may save as much or as little as you want for your spouse. With the reduced pension benefit options, you lose the pension benefit you saved for your spouse if he predeceases you.
You must have your spouse sign a waiver stating that he understands that she waives all rights to future benefit payments from the pension plan if you choose the lifetime or lump sum pension benefit option.
