Making sure that you don't outlive your nest egg is one of the biggest challenges of retirement planning. Traditional pension plans are employer-offered retirement benefits that can give you income for life and help ensure that you don't run out of cash in your later years. The exact length of time that a pension pays out depends on the payment options your plan offers.
TL;DR (Too Long; Didn't Read)
Depending upon the specific pension plan you choose, payments may continue up until your death or pass on to a designated survivor.
Single Life Annuity
When you reach retirement, you typically have the chance to choose between several different pension payment plans that determine how long you receive payments. According to Fidelity, all pension plans must provide a life annuity option. A basic single life annuity provides you with a fixed payment every month for the rest of your life. With a single life plan, annuity payments stop as soon as you die.
Joint and Survivor Annuity
A joint and survivor annuity is a payout option that can allow pension income to continue after your death. With a joint annuity, you receive payments for life just like you would with a single life annuity, but a beneficiary such as a spouse keeps getting cash each month even after you die. Since joint and survivor annuities cover two people, they pay out longer than single life annuities on average, so they usually offer lower monthly payments.
Period-Certain Life Annuity
A period-certain life annuity is a pension payment option that shares some features of both single life and joint annuities. Under a period-certain life plan, your pension guarantees payouts for a specific period, such as five, 10 or 20 years. If you die before the guaranteed payout period, a beneficiary can continue getting payments for the remaining years. If you live beyond the certain payout period, the plan acts just like a single life annuity: you keep getting income for life, but the plan disappears when you die.
Some pension plans let you take a one-time lump-sum payment when you enter retirement instead of a series of small payments for life. A lump-sum payment gives you more control over your money than annuity payout options, but if you don't make wise investments, you might use up all of your cash before the end of your retirement. A lump-sum payment can also result in a hefty tax bill unless you roll the funds over into a tax-deferred retirement plan like an individual retirement account, or IRA.