‘Life &10-Yr Certain’

‘The Spousal Benefit’

Example: FRS

employee: Mary, 60. (Husband, Fred, 61)

Highest 5-yr income: 60k/yr.

$2,400/mo. for Mary’s life. Nocontinuing benefit to Fred.

$2,200/mo. for Mary’s life.

Upon Mary’s death, Fred continues getting $2,200only until 10 years from when Mary entered DROP (and officially retired).

$1,800/mo. for Mary and Fred’s life.

NO change in amount when Mary dies, and ends only when both die.

$2,250/mo. for Mary’s life.

Upon Mary’s death,

Fred gets about 65%, or about $1500, for rest of his life.

Includes Beneficiary?

NO

Spouse, children, other heirs, charities, organizations, or your estate/trust can be primary beneficiaries (or contingent after death of primary beneficiary).

Spouse, children,

OR: parent/grandparent, disabled child or person you are legal guardian for(if you provide 50% financial support)

Monthly benefit payment during employee’s lifetime. Amount based on yrs. of work & average of highest 5 yr salary.

Reduced monthly benefit for lifetime; payments to beneficiary continue until 10 yrs. from when employee entered DROP.

Reduced monthly benefit for lifetime AND beneficiary’s lifetime (some exceptions apply).

Adjusted monthly lifetime benefit. Beneficiary gets lower amount upon your death until he dies.

PRO:

Ideal if:

-you have no spouse/other dependent.

–your spouse/ other dependent is ill/expected to die before you.

–your spouse has other income and is not in need of your continuing support after your death.

PRO:

Ideal if: you have no spouse/other dependent to be recipient of continuing benefit under Option 3 or 4 after your death.

–you are ill/ your future physical condition is uncertain at time of retirement.

PRO:

Gives lifetime security to you AND your beneficiary.

CON:

Significant reduction from Option 1 that may be better used to purchase life insurance-which is likely cheaper andstill provides protection after your death.

PRO:

Ideal if: you anticipate need for larger benefit while both you and your beneficiary are living, and a smaller benefit when only one of you survives.