Your pension represents years of dedicated service, so take a moment to understand how your payment choice impacts your retirement income.
Ensure your pension payment honors your past efforts and future hopes for yourself and your family.
The payment option you choose at retirement determines how much income you receive each month and what financial protection you can provide for your loved ones after you’re gone. As a PERF or TRF Hybrid member, your options for pension benefit payments are:
- Five-year certain with lifetime guarantee
- Straight life
- Joint with 100% survivor benefit
- Joint with 66⅔% survivor benefit
- Joint with 50% survivor benefit
While INPRS has resources that describe the main features for each option1, the best choice is based on your unique circumstances. The straight life option maximizes your monthly income but provides no survivor benefits. Joint options reduce your immediate payments but create a financial safety net for your loved ones when you pass away.
Here are three questions to ask yourself when choosing your pension benefit payment:
1. Do you need to provide ongoing income to loved ones after your death?
If you’re single with no dependents, or if your spouse won’t depend on your pension income, the straight life option might make sense because payments will be highest during your lifetime but cease upon your death.
If your survivor will need your pension income when you pass away, consider a joint payment option. The higher the percentage of the joint survivor benefit, the lower your monthly payment will be. However, your survivor will receive that percentage of your monthly benefit for the rest of their lifetime.
2. Do you have health concerns that suggest a shorter life expectancy or are you considerably older than your survivor?
If so, joint options become more valuable since they ensure your survivor receives income after your death.2 If you expect to outlive your survivor, a straight life option might provide better overall value by maximizing your monthly payments during the years you’re both alive.
The Actuaries Longevity Illustrator can help you calculate the probabilities that you (and your spouse or partner, if applicable) may live to different ages.
3. What are your immediate and long-term financial needs?
If you have high immediate expenses or limited income sources, you might need the higher monthly payments that come with the straight life option or social security integration1, depending on your age.
If the reduced benefits of a joint option are enough to cover costs, this choice provides valuable insurance against leaving a survivor in financial hardship.
No matter what your choice is, keep in mind that you can change your option at any time. For example, if you’d like the higher benefit that comes with the straight life option because you plan to be spending more in early retirement, you can change your option to a joint survivor benefit later.
1For a detailed explanation of each option, including social security integration, check out this page or section seven of the PERF or TRF Hybrid Plan Member Handbook.
2Another option to consider is the five-year certain with lifetime guarantee, which ensures a monthly payment for your lifetime. If you die before receiving 60 monthly benefit payments, your beneficiary(ies) will receive the benefit for the remainder of the 60 months, and payments will stop after 60 months.