When you retire from NYSLRS, you’ll need to decide how you want to receive your pension benefit.
You’ll have several pension payment options to choose from. All of them will provide you with a monthly benefit for life. Some 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, depending which option she chooses, her grandkids would split her reduced benefit amount for the rest of that period.
However, the Five and Ten Year Certain options wouldn’t be lifetime benefits, and since her husband doesn’t have his own pension, she decides to leave him a lifetime pension benefit and look into a tax-deferred college savings plan for her grandkids instead.
There are several options that leave a lifetime benefit. Under these options, you can only name one beneficiary. Benefit amounts are determined based on the birth dates (life expectancy) of both the retiree and their beneficiary, so Jane will receive less of a pension reduction leaving a benefit to her husband than she would if she were to consider leaving a lifetime benefit to a grandchild.
Under the Joint Allowance — Full or Joint Allowance — Half option, if a retiree dies, depending which option they choose, their beneficiary would receive half or all of their reduced benefit for life.
Under the Pop-Up/Joint Allowance — Full or Pop-Up/Joint Allowance — Half option, if a retiree dies, depending which option they choose, their beneficiary would also receive half or all of their reduced benefit. These options reduce the pension a little more, but they have an advantage: If the 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 and whether you’ll leave a pension benefit to a beneficiary or beneficiaries, you may also want to consider questions such as:
- Do you qualify for a death benefit?
- Do you have life insurance?
- Do you have a mortgage, unpaid loans or other monthly payments that will have to continue 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. Most NYSLRS members can also create their own pension estimate in minutes using Retirement Online. You can enter different retirement dates to see how those choices would affect your benefit. When you’re done, you can print your pension estimate or save it for future reference.