What Happens to Your Pension if You Die Before You Retire?


When you work for a company that offers a pension plan, you know that your retirement will be taken care of when you reach the proper age. If you pass away before you reach retirement, your pension plan may also provide benefits to your surviving family members. Death benefits can differ from one plan to the next.


When you work for an employer who offers a pension plan, you have to work for the company a certain amount time before you can be eligible to receive pension benefits. This is also referred to as vesting. You must be vested before you can receive pension benefits. If you pass away before you are fully vested in the pension plan, your spouse or children may not receive any debt benefits from the plan. The time that it takes to get vested varies between plans.


When you get involved with a pension plan, your employer may require you to name one or more beneficiaries. This typically takes place when you initially enroll in the pension plan and fill out your paperwork. You must usually name a primary beneficiary who will inherit your benefits if you pass away. Some plans also allow you to name a contingent beneficiary to receive the benefits if the primary beneficiary is unable to take them. This can be beneficial so that you know your benefits at least go to someone if the first beneficiary has also passed away.

Lump Sum

When you pass away and you are fully vested in the pension plan, your company may provide a lump sum to your beneficiary. With this option, the pension plan will simply write a check to the beneficiary that you designated. The size of the lump sum will depend on how long you worked at the company and the rules of the pension plan. For example, the lump sum may not be the same if it is paid as a death benefit.

Annuity Payments

Some pension plans provide an annuity payment to your beneficiary when you pass away. With this option, your beneficiary receives a specific payment from an annuity contract. The annuity payment can go for a fixed period of time or it could last for the remainder of the beneficiary's life. In some cases, the beneficiary will be able to choose between a lump sum and an annuity payment, depending on which option seems most attractive to him at the time.

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