Skip to Content
Husband and wife sitting on couch drinking coffee and talking about managing their money in their marriage.
Retirement Planning

What happens to my pension when I die?

Protect future payments from your pension plan by ensuring a beneficiary has been named. If no one has been named, the distribution of your pension will be determined by the rules of your plan and/or state.

If you're fortunate enough to work for a company that offers you a pension plan, you can feel good knowing that come retirement, you'll have a steady income to draw from. But what happens to your pension if you die before you retire?

When you initially enroll in your employer's pension plan, you'll be asked to name a beneficiary. The beneficiary is the person who will receive your pension when you die. Much like naming a beneficiary on a life insurance policy, you can name one or more individuals to receive the benefits of your pension.

The importance of naming a beneficiary

If you don't designate a beneficiary or if the original beneficiary has since died and you failed to assign a replacement or don't have a contingent beneficiary, your pension will be distributed according to the rules specified in your pension plan and in some cases, your state of residence. In many cases, if a beneficiary is not specified, the proceeds will go into your estate and become subject to probate prior to distribution, a much longer, more complicated process than when you have specified an individual as beneficiary. 

With some plans, that could mean having benefits distributed to a surviving spouse (if you have one), your children (if any), your parents (if still alive), or other next of kin. Therefore, if you want to have a say in who inherits your pension, assigning a beneficiary and regularly reviewing your beneficiary form is important.

It's important to assign primary as well as secondary beneficiaries in case something happens to your primary designation. It's important to review your beneficiaries regularly in case of life changes such as divorce, additional children, death of family members, etc. 

The pension payout

How your beneficiary is paid depends on your plan. For example, some plans may pay out a single lump sum, while others will issue payments over a set period of time (such as five,10, or even 20 years), or an annuity with monthly lifetime payments. 

If the pension owner dies after pension benefits have been distributed, then the designated beneficiary will receive payout less the amount that has been distributed to the pension owner. 

Claiming pension payouts as the beneficiary

If you were to die before you retire, your surviving spouse or other named beneficiary must contact your employer or the plan's administrator to make a claim on any available benefits. At that time, the plan administrator will generally request a copy of the death certificate. Depending on the type of plan, your surviving spouse or other named beneficiary will be notified as to:

  • the amount and form of benefits (in other words, lump sum or installment payments under an annuity);
  • whether death benefit payments from the plan may be rolled over into another retirement plan; and if a rollover is possible, the method and time period in which the rollover must be made.1

If you leave a job that offers a pension, it may be possible to take a lump sum payment at the time of your departure and roll over those funds into an IRA. This can help defer taxes due to the lump sum until you begin withdrawals during retirement. In addition, it may allow you to invest the money as you wish.

Understanding taxes on pension payouts

Regardless of how it’s distributed, your beneficiary will be required to report the proceeds from your pension as income on his/her taxes. However, as mentioned above, there may be ways to shelter pension money from taxes by rolling funds into an IRA. Check with your financial professional, as state laws vary and tax issues also depend on the pension contract.

What happens to my pension if I die after retirement?

If you die after you have already started drawing your pension, the amount your beneficiaries receive will be based on how much you have drawn from pension. If there is cash remaining, your beneficiaries may be able to withdraw a lump sum or access regular payments, depending on specifics on your pension contract. 

As a part of your retirement planning, don't forget to make sure you have named a beneficiary to your pension plan. To learn more about pensions and defined benefit plans, visit the Protective Learning Center.





Arrows linking indicating relationship

Related Articles

Older gentleman sitting on his couch, contemplating his next move in chess

Thinking about retiring during a recession

Learn more
Mother and daughter enjoying afternoon walk together by the lake.

How to plan for retirement and your child's college education

Learn more
Female business owner sitting at desk in sunny office

Retirement FAQs

Learn more
All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective or its subsidiaries.

Neither Protective nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax-related decisions. For information about Protective and its products and services, visit

Companies and organizations linked from Learning Center articles have no affiliation with Protective or its subsidiaries.