Your pension when the unexpected happens

What if you die?
What if you die? © Jeff Wasserman/

If you have an old-fashioned defined benefit pension, your employer is required to offer a plan that leaves the surviving spouse with at least 50 percent of the deceased employee's pension. In the case of a 401(k), the surviving spouse gets all the vested benefits -- even if you name another beneficiary. In both cases, the spouse can waive these rights, but he or she must agree in writing.

Spousal protections went into effect when President Ronald Regan signed the Retirement Equity Act of 1984 into law. According to The New York Times, he said at the time, "No longer will one member of a married couple be able to sign away survivor benefits for the other."

Should you sign away your spousal rights in return for life insurance or some other option? Hounsell says, "We're against it. When a spouse dies, the surviving spouse almost always needs the money. Some people advise buying life insurance instead, but for many people, that doesn't work out."

One final point: individual retirement accounts aren't covered by ERISA, so in this case, a named beneficiary takes precedence over spousal rights. This means if you leave your ex-spouse as beneficiary of your IRA, he'll get it. That makes it particularly important to change your beneficiary form when you divorce.


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