Chapters

00:00 Introduction to Retirement Benefits

00:34 Understanding the Retirement Process

02:53 Exploring the Seven Base Options

04:36 Defining Key Terms in Retirement Planning

05:37 Partial Lump Sum Option Explained

07:34 Action Items for Upcoming Retirees

08:07 Next Video Preview and Disclaimer

Transcript

Hi everyone, I'm Ryan Earley, vested PERS member, former school finance officer, and host of the PERS Pro YouTube channel. Choosing your retirement benefit option is the most significant financial decision you will make at the end of your career as it determines exactly how your hard-earned retirement funds are distributed to you and your loved ones for the rest of your life. Let's get started.

Before you can pick an option, you need to understand the process. The process is generally split into two phases.Phase 1, Form 9A Service. This is the pre-application. You should submit this three to four months before your expected retirement date. This form establishes your anticipated retirement date and triggers PERS to perform an audit of your account to provide what's called an estimate of benefits. Phase 2, the benefit packet. Once PERS processes your pre-application, they send you a packet containing your official Form 9S Service Retirement Application Form. This form is where you make your final, often irrevocable choice of a benefit option. You have until 90 days after your effective retirement date to return all completed forms to PERS.

Mississippi PERS offers seven base options for retirement. It's easy to get overwhelmed, but all seven base options share a few fundamental traits. First, the monthly benefit is provided for the life of the retiree. Second, all base options include a cost of living adjustment. And third, all options have a monthly benefit formula based on your average compensation and service credit.

There wouldn't be seven base options though if there weren't plenty of differences between the options. These differences lie in four key areas. First, the benefit amount. Each option has different monthly benefit amounts and subsequently COLA amounts because each option offers different protections to your beneficiaries. Two, beneficiary provisions. Some options allow for multiple beneficiaries with no naming restrictions while others limit you to one natural person. Three, the ability to change options. This is pop-up and pop-down. Under specific conditions like the death of a beneficiary or a new marriage, you may be able to pop-up to the maximum allowance or pop-down to provide for your new spouse depending on the option you select. Fourth, IRC Limitations Internal Revenue Code Section 401(A)(9) may limit the benefit amount if your non-spouse beneficiary is significantly younger than you depending on the option you select.

To choose wisely, you have to speak the PERS-defined benefit language. Let's define four essential terms you need to know. Annuity - This is a guaranteed income stream for the rest of someone's life. Beneficiary - This is a person or entity legally designated to receive proceeds or benefits owned by someone else. A primary beneficiary is the first person or entity in line to receive benefits after you pass. A contingent or secondary beneficiary is the backup person or entity in line to receive benefits only if the primary beneficiary is deceased. Actuarial calculation or actuarial reduction - This is a mathematical process using general life expectancy tables and assume interest rates to ensure different benefit options have an equivalent value over time for the average person. PLSO - This stands for partial lump sum option and it provides cash upfront in exchange for a lower monthly benefit.

The seven base service retirement options are as follows: Maximum retirement allowance option, option 1, option 2, option 3, option 4, option 4A and option 4B. To make things simple, like to group the seven base options into three buckets based on their primary goal. One, the single life annuities. This is the maximum retirement allowance and option number one. The focus of this is to provide the highest possible benefit for you. Benefit: Monthly payments stop at your death. Any remaining employee contributions are paid to your beneficiary in a lump sum. Two, the joint and survivor annuities. This is options two, three, four, and 4A. The focus of these options is to provide lifetime protection for a beneficiary. Benefit: You take a reduction now so that when you pass your beneficiary receives your benefit for the rest of their life. Three. Guaranteed payment periods. This is option 4B. Its focus is to provide protection for a beneficiary for a fixed window of time. Benefit: You receive a reduced benefit for life, and if you die within 10, 15, or 20 years of retiring, your beneficiary continues to receive your check for the remainder of that period. In future videos, we will go into more detail on each of the seven base options.

Beyond the seven base options, many retirees are interested in the partial lump sum option. What is it? It is an add-on to your base option that allows you to receive a lump sum of either 12, 24, or 36 months of your maximum retirement allowance up front. Eligibility: Generally, this requires 28 years of service at any age for tiers 1 through 3 members, or 33 years of service at any age for tier 4 members. Tiers 1 and 2 also are eligible for PLSO at age 63 with 4 years of service. The tradeoff, selecting a partial lump sum option results in an actuarial reduction of your monthly benefit for life. Note that the PLSO can be added onto most base options except for option 1. In future videos, we will go into more detail on the partial lump sum options.

If you are ready to retire within the next 12 months, here are your action items for today. One, review your annual member statement. If you are within four years of service, your annual member statement will list your projected date of retirement eligibility, estimated average compensation, total years of service credit, and estimated annual service retirement benefit using the maximum benefit option. It will also list your current beneficiary information. Two, File an Advanced Application if Eligible. If you are currently eligible to retire now, consider filing an Advanced Application Form 16 which establishes how your benefits are paid in the event of your death before retirement. This can be filed and changes can be made at any time prior to your effective date of retirement or death. 3. Update Beneficiary Information. If you notice your beneficiary information is not up to date on your Annual Member Statement, make necessary changes now by filing form 1B with PERS.

I hope this video helped you better understand the 7 service retirement base benefit options available to you as a Mississippi PERS member. In our next video, we'll explore the first option, the base maximum retirement allowance option, and who might benefit the most from selecting it. Please make sure you subscribe so you don't miss this and other videos in our new retirement series. If you found this video helpful, can thank me by hitting the thumbs up button and sharing it with other PERS members. If you have a follow-up question about PERS or anything else related to personal finance, please visit our website at perspro.ms and submit your question or topic for a future episode. Thank you for your valuable service to the state of Mississippi. We'll see you next time.

Disclaimer, this video is for educational and informational purposes only. Neither the host nor this YouTube channel are officially affiliated with, endorsed by, or sponsored by the Public Employees Retirement System of Mississippi. Always consult a qualified professional for personal advice specific to your situation.