When it comes to your retirement income, the option you choose can significantly impact the amount you receive.
If retirement is around the corner, you’re likely facing many decisions — including choosing the best CalPERS retirement payment option. Knowing what choices are available, and how the one you choose could affect you and your loved ones, is critical to securing your financial future.
Start by Naming a Beneficiary
A beneficiary can be anyone you choose to receive a lump sum or lifetime benefit. Even if you designate someone else as a beneficiary, your spouse or registered domestic partner will receive their Community Property (PDF) share of the death benefit. The remainder goes to your designated beneficiary. Do You Have a Beneficiary Designation on File?
Understand Your Options
When you retire, you’ll have choices to make about how your benefits will be distributed. You can receive pension payments for your lifetime only or opt for a reduced payment so your loved ones can receive benefits after you’re gone. The cost of each option is specific to you and depends on factors such as your age, your beneficiary’s age, life expectancies, and how much you’ve contributed to the retirement plan.
Unmodified Allowance
- This option provides the highest monthly allowance for life.
- No money will go to anyone after you pass away.
- All other options involve a reduction of this allowance.
Return of Remaining Contributions
- With this option, you’ll get a slightly lower monthly allowance than the Unmodified Allowance.
- When you pass away, any money left in your account from your member contributions and interest is given as a lump sum to your chosen beneficiary or beneficiaries. (For the average CalPERS member, their contributions are paid out toward their retirement benefit over the first 9 to13 years of retirement. After that, your pension payments continue, paid by employer contributions and CalPERS’ investments.)
100% Beneficiary
- You’ll receive a lower monthly allowance than with the Return of Remaining Contributions option.
- When you pass away, your chosen beneficiary receives 100% of your monthly allowance for their lifetime.
- If your beneficiary passes away before you do, your allowance remains the same.
- This option also includes a return of remaining contributions to one or more secondary beneficiaries if both you and your beneficiary pass prior to your contributions being fully distributed.
100% Beneficiary With Allowance Increase
- Like the 100% Beneficiary option, you’ll receive a reduced monthly allowance.
- After you pass away, your chosen beneficiary receives 100% of your monthly allowance for life.
- If your beneficiary passes away before you, your allowance increases to the Unmodified Allowance.
50% Beneficiary
- While you’re alive, you receive a higher monthly allowance than with the 100% Beneficiary options.
- After your death, your chosen beneficiary receives 50% of your monthly allowance for their lifetime.
- If your beneficiary passes away before you, your allowance remains the same.
- This option also includes return of remaining contributions to one or more secondary beneficiaries if you and your beneficiary pass prior to your contributions being fully distributed.
50% Beneficiary With Allowance Increase
- Like the 50% Beneficiary option, you receive a lower monthly allowance.
- After your death, your chosen beneficiary receives 50% of your monthly allowance for their lifetime.
- If your beneficiary passes away before you, your allowance increases to the Unmodified Allowance.
Flexible Beneficiary
- This option allows you to provide one or more beneficiaries with a lifetime allowance of either a specific dollar amount or a specific percentage of your Unmodified Allowance.
- The reduction to your allowance while you’re alive depends on the age of your beneficiary and the specific dollar amount or specific percentage chosen.
Changing Options After Retirement
What if your circumstances change, and you get married or enter a domestic partnership? Even after retirement, you can make changes to your retirement payment options under specific circumstances.
Learn more in our article When to Change Your Beneficiary Designation After Retirement.
Try Out Different Scenarios
Take your time to weigh the pros and cons of each option, and don’t hesitate to seek advice from experts, like a trustworthy financial advisor. Using our Retirement Estimate Calculator allows you to create estimates based on the different scenarios to find the one that’s the best fit for you. Check out the “Your Retirement Estimate and Payment Options” video to learn more.