A Closer Look at Retirement Payment Options, PART 2
When you apply for retirement, you must select a payment option. The option you choose determines the amount you receive while alive and if you wish to provide an amount to a beneficiary after your death in retirement. Your retirement income is reduced to provide a benefit to someone else after you pass away.
For a lifetime benefit to your beneficiary, the reduction you take is based on actuarial factors of the ages for both you and your beneficiary at the time of your retirement. The younger your beneficiary, the more significant the reduction you’ll take to fund their benefit.
OPTIONS:
The Unmodified Allowance: This provides the highest monthly allowance paid for life. There is no continuing monthly benefit to a beneficiary and no return of your member contributions. You are allowed to have the survivor portion of your pension go to a spouse, registered domestic partner, child, or in rare situations, a dependent parent.
Return of Remaining Contributions Option 1: This option provides an allowance that is lower than the Unmodified Allowance. This allows you to leave the balance of your contributions to one or more beneficiaries. Depending on your contribution amount, your contributions are paid out to you as a portion of your monthly allowance for the first 9 to 13 years of retirement. Your monthly benefit does not change once your contributions have been returned to you. The difference is covered by employer contributions and CalPERS investment returns. Your estimate will provide information regarding your remaining contributions.
The remaining options provide a lifetime monthly income to your beneficiary, and the State paid Survivor Benefit if you have a qualifying survivor as defined by law.
100 Percent Beneficiary Option 2: This option allows you to name one beneficiary to receive 100 percent of the portion of your monthly benefit upon your death in retirement.
Suppose both you and your monthly beneficiary die before all your contributions have been returned to you. In that case, the remaining amount will be paid out in a lump sum to one or more secondary beneficiaries that you named. If you or your beneficiary dies first, the benefit payment remains the same. If you or your spouse chose choose this benefit, the dollar amount does not change.
100 Percent Beneficiary Option 2 with Benefit Allowance Increase: This option provides 100 percent of the portion to one beneficiary, but if your beneficiary predeceases you, your benefit will increase to the amount of the Unmodified Allowance. As in the option above, there is no return of member any remaining contributions to secondary beneficiaries if you both die before 9 to 13 years.
50 Percent Beneficiary Option 3: This option allows you to name one beneficiary to receive 50 percent of the portion of your monthly benefit upon your death in retirement.
Suppose both you and your monthly beneficiary die before all your contributions have been returned to you. In that case, the remaining amount will be paid out in a lump sum to one or more secondary beneficiaries that you name.
50 Percent Beneficiary Option 3 with Benefit Allowance Increase: This option provides 50 percent of the option portion to one beneficiary, but if your beneficiary predeceases you, your benefit will increase to the Unmodified Allowance. There is no return of member contributions to secondary beneficiaries.
Flexible Beneficiary Option 4: Finally, the Flexible Beneficiary Option 4 allows you to designate a Specific Percentage or a Specific Dollar Amount to your Beneficiary. For this option, you can name one or more beneficiaries. If you decide to take this option, the younger you beneficiary, the bigger the deduction will be to your allowance while alive.
Choosing Your Retirement Option: Choosing your retirement option is one of the most important things you’ll do when submitting your retirement application. It’s important to review all your retirement income sources and determine what to provide to your beneficiary if you should predecease them.
