When your spouse dies, you will be entitled to any retirement benefits that name you as a beneficiary. Normally, this might include a pension, personal savings and even Social Security benefits. Make sure you understand how these benefits are paid out to you so that you receive everything to which you are entitled.
When you inherit a pension from your spouse, you may elect to receive a lump sum amount or monthly payments. Regardless of your decision, the dollar amount you choose will be based on how much your spouse set aside for you. If your spouse set aside 50 percent of his pension, you'll receive 50 percent of his pension. If he set aside only 25 percent, you'll receive 25 percent of his pension.
A retirement account, like an IRA or 401(k), offers you the option of treating the account as your own or rolling the account into an account that you already own, making contributions and investments as well as withdrawals, or taking a full distribution from the account. If you take a full distribution, you pay ordinary income tax that is normally due on the account, if any. If you elect to treat the account as your own (or transfer the funds into another account you own) then you will simply defer the tax due on the account (unless the account is a Roth account, in which case taxes are eliminated altogether).
You may inherit your spouse's Social Security benefits. You can claim them at age 60 at the earliest. However, full benefits are payable to you at 66 if you were born between 1945 and 1956 while full benefits are available at age 67 if you were born in 1962 or later. Additionally, if you have a child who is under age 16 or have a child that is disabled, you will receive survivor benefits.
When you inherit benefits, you must claim them. You may receive communication from your spouse's brokerage, for example, in regards to personal savings. But, you must file forms with the brokerage to receive the inheritance. These will be beneficiary forms. The same holds true for Social Security and pension plans. If you do not make a claim for benefits, the money will be held for you until you make a claim.
- "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
- SSA: Survivors Benefits