Very few private business employers offer pensions to employees. Therefore, the focus here relates to individuals who are participants in the Public Employee Retirement System (PERS). The PERS plan is a valuable benefit that is intended to provide a retiree and spouse with a financially secure retirement. PERS is a community property asset meaning married participants are required to share their pension via several survivor options, one of which must be selected just prior to retiring. The survivor options reduce the pension income paid to the retiree and determines how much income continues to the spouse after the participant’s death. Prior to retiring both spouses are required to meet with a PERS counselor to select an option. The PERS counselor notarizes their signatures making their decision final.
PERS counselors do not make recommendations as to which option is best for a couple. That is because there are other factors to be considered before making an irrevocable decision. The option choices are outlined in the PERS Regular Members Pre-Retirement Guide. Selecting a survivor option is complex and often the single largest financial decision a couple will ever make. Again, these options reduce the income for the life of the participant and the spouse.
The pension participant should consider whether other assets are significant enough to avoid the cost of electing a survivor option or if the spouse will have pension income of their own. The pension plan does allow a spouse to waive taking an option. In all options pension income ceases upon death of the 2nd spouse. A participant can avoid taking a reduction in pension income through proper planning with a personal life insurance policy. This strategy provides more control to the participant and can create a potential inheritance for heirs. The earlier in a career these options are reviewed and understood, the better the choice of alternatives that may be more cost effective and provide greater control over this valuable benefit. Use the link below to obtain current PERS retirement projections and the cost of the various options.
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