Tags: Retirement | retirement | spouses death

How Spouse's Death Affects Your Retirement Plan

By    |   Thursday, 11 June 2015 10:58 PM

Spouses plan together for their golden years, but death sometimes cuts those years short. However, retirement savings, pensions and even Social Security can pass to the surviving spouse.

Here are some things to consider about how the death of a spouse can affect retirement plans.

Rodgers & Associates Retirement Specialists advises that expenses are not cut in half if half of a couple passes away. Considering housing and utility costs, expenses are only expected to drop by about 20 percent when a spouse dies.

Free Retirement Calculator: When Can You Retire? — Click Here to Find Out

According to the Internal Revenue Service, survivors are usually entitled to the pension plan benefits of their spouse. Most often, the spouse has been named as the beneficiary for an account and can either be distributed the funds in an annuity or a lump sum. An annuity is a fixed amount paid yearly. A lump sum is an amount paid at one time. The options for survivors of other retirement savings plans vary based on the type of plan.

The Employee Retirement Income Security Act protects pension plans and ensures that surviving spouses are able to have access to a vested pension, according to the U.S. Department of Labor.

A 401(k) is part of the deceased spouse’s taxable estate, according to 401khelpcenter.com. While the IRS has some rules, the rules may vary from plan to plan. So, it is important to read the fine print and know exactly what kinds of roll-over options and timelines are in place.

Things to look for include the possibility that you will only have until Dec. 31 of the year in which your spouse died to make a decision. You may have to take a payout over just a few years, at one time in a lump sum, or perhaps over the course of your expected lifetime. If you are the spouse left behind, that 401(k) money can be rolled into an IRA without penalty.

How Soon Can You Retire? Free Test Shows You When — Click Here

For those relying on Social Security, the death of a spouse can be a big hit. If both spouses are drawing Social Security, one of those checks will go away, according to the Social Security Administration. If only one check is coming in and a spouse dies, Social Security benefits pass to the survivor. A widow or widower can receive benefits based on their spouse’s earnings as long as they do not remarry before the age of 60.

Ex-spouses are also potentially entitled to widow or widower’s benefits, if they were married at least 10 years. Even divorce decrees in which the spouse gave up Social Security benefits will not stand as long as the marriage lasted at least 10 years.

For pension plans, there are usually two options. The first is a life income option, which will pay a monthly income to the plan owner as long as they live, but offers nothing to the surviving spouse. The second is a joint and last survivor option, which offers a percentage of the pension to the surviving spouse.

An Extremely Simple Way to Determine If You're Ready to Retire — Find Out Now

Related Stories:

© 2020 Newsmax. All rights reserved.


   
1Like our page
2Share
Money-Wire
Spouses plan together for their golden years, but death sometimes cuts those years short. However, retirement savings, pensions and even Social Security can pass to the surviving spouse.
retirement, spouses death
557
2015-58-11
Thursday, 11 June 2015 10:58 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved