Pension survivor elections

The protection

For qualified retirement plans, federal law generally requires benefits to be paid as a joint and survivor annuity for a married participant — and waiving that in favour of a single-life option generally requires the spouse's written, notarised consent.

That means a spouse cannot be signed away quietly. If you're the spouse, that consent form is your decision as much as your partner's, and it deserves the same scrutiny as any other irrevocable financial document.

Rules differ between plan types, and government and some other plans work differently. Confirm what applies to your specific plan.

What the election costs and buys

A single-life option pays more each month and stops entirely at your death. A joint and survivor option pays less and continues, at a stated proportion, to your spouse.

The difference between them is effectively the price of the survivor protection, and it's paid from every monthly payment for the rest of your life.

The insurance alternative

Taking the higher single-life payment and using part of the difference to buy life insurance is a recognised strategy, sometimes called pension maximisation.

It can work. It also fails badly in specific ways, and those need modelling before the election, not after.

• It depends on being insurable at a reasonable cost — check that before electing, not after
• The coverage must last as long as the survivor might, which usually means permanent coverage
• If the policy lapses, the survivor has nothing and the election can't be undone
• Survivor health coverage tied to the pension may be lost with the survivor annuity
• Cost-of-living adjustments on the pension may not be replicated by a fixed death benefit

Questions for your plan administrator

• What options are available, and what does each pay?
• Is the election irrevocable, and from when?
• Does survivor health coverage depend on electing a survivor annuity?
• What happens if my spouse predeceases me — does the payment revert?
• Are cost-of-living adjustments applied, and do they continue to a survivor?
• What happens to the benefit if I die before retiring?

Do this before you elect

Get the actual figures for each option, get a life insurance quote for the amount and duration you'd need, and model both against a realistic range of lifespans.

Then involve your spouse in the decision properly. It affects them more than it affects you.