When you retire from NYSLRS, you’ll need to decide how you want to receive your pension benefit.
You’ll have several options. All of them provide a monthly benefit for life. Some also provide a limited benefit for one or more beneficiaries after you die. Others let you pass on a monthly lifetime pension to a single beneficiary. Each option pays a different amount, depending on your age at retirement, your beneficiary’s age and other factors.
That’s a lot to think about, so let’s make this clearer with an example. Meet Jane. Jane plans to retire at age 60, and she has a husband, a granddaughter and a grandson who are financially dependent on her. First, Jane needs to decide whether she wants to leave a benefit to someone after she dies. She does.
That eliminates the Single-Life Allowance option. While it pays the highest monthly benefit, all payments stop when you die.
Jane considers naming her grandchildren as beneficiaries to help pay for their college education.
The Five Year Certain and Ten Year Certain options don’t reduce her pension much, and they allow her to name more than one beneficiary. If Jane dies within five or ten years of retirement, her grandkids would split her normal benefit amount for the rest of that period.
However, the Five and Ten Year options wouldn’t be lifetime benefits. Since her husband doesn’t have his own pension, she’ll leave him her pension and look into a tax-deferred college savings plan for her grandkids instead.
There are a few options that leave a lifetime benefit:
The Joint Allowance — Full and Joint Allowance — Half options continue paying all or half of the retiree’s normal benefit amount to the beneficiary for life.
The Pop-Up/Joint Allowance — Full and Pop-Up/Joint Allowance — Half options also continue the retiree’s normal benefit. They reduce the pension a little more, but they have an advantage: If a retiree outlives his or her beneficiary, the retiree’s monthly payment will “pop up” to the maximum payable under the Single-Life Allowance option.
As you plan for your own retirement, you may also want to consider questions, like:
- Do you qualify for a death benefit?
- Do you have life insurance?
- Do you have a mortgage or unpaid loans that will have to be paid if you die?
These and other factors can significantly impact your retirement planning.
To find out more about pension payment options, check your retirement plan booklet on our Publications page. You can also try our Benefit Calculator, which allows most members to estimate their benefits under the different payment options. For tips on developing a financial strategy that works for you, take a look through Straight Talk about Financial Planning for Your Retirement.