Chapters

00:00 Introduction

00:31 Data Source for Analysis

01:29 Most Popular Service Retirement PERS Options

02:28 Insights from Most Popular Service Retirement PERS Options

03:43 Service Retirement PERS Option Popularity Across Monthly Benefit Amounts

05:11 Insights from Popularity Across Monthly Benefit Amounts

05:54 Action Items for PERS Members

06:29 Preview of Next Video

07:20 Disclaimer

Transcript

Hi everyone, I'm Ryan Early, vested PERS member, former school finance officer, and host of the PERS Pro YouTube channel. Are you wondering what PERS options your fellow Mississippi public servants are choosing at retirement? We've analyzed the data for you and will share which ones are the most popular and explain why in today's video. Let's get started.

If you haven't watched our previous videos outlining the overview of each PERS service retirement option, I encourage you to watch those videos. Today's analysis is based on the data reported annually by the Mississippi Public Employees Retirement System. We've pulled these data points directly from the Retired Members by Type of Benefit Schedule in the Statistical Section of the 2025 PERS Annual Comprehensive Financial Report, or ACFR. This data set represents a total population of over 118,000 per-service retirees as of June 30, 2024. A couple notes here before we share our findings. First, we omitted those retirees that selected option 4C and option 5. Option 4C totaled a little less than 2,000 retirees and option 5 totaled a little more than 100. Second, I'll reiterate, we are only looking at service retirees and are excluding disability and survivor participants.

Using the data as of June 30th, 2024 from the 2025 ACFR, we can see exactly which options are the most popular and which ones are rarely used. This chart shows the total percentage of retirees selecting each option. You immediately see that the life or max option is the most popular by far. Ranked from the most popular. Ranked from the most popular to the least popular, we have maximum option or life annuity at 66%, option two, 100% joint and survivor annuity at 15%, option four B, 10, 15 or 20 years certain at 8%, option four A, 50% joint and survivor annuity at 6%, option one, pro rated single life annuity at 3%, option four, 75% joint and survivor annuity at 2%. And finally, option three, 100 % joint and survivor annuity fixed at 1%.

If from an actuarial risk perspective, all service retirement options provide the same expected lifetime value to a PERS retiree, what possibly could explain why so many PERS retirees concentrate their selection to a few options and avoid the others? The max option is by far the most popular choice, indicating a strong preference for the highest monthly payment to the retiree with no continuing benefit to a survivor. Option two is also quite popular indicating that for some there is a preference for complete survivor protection for a beneficiary, which I suspect most of the time is a spouse or significant other. Option three is the least selected option possibly because it's the only option that does not allow you to change your beneficiary at any time. And it does not allow you to pop up like option two. In this regard, option three provides the least amount of flexibility amongst all the options. The most surprising thing for me in this data is seeing option 4B as the third most popular option and being sandwiched between two joint and survivor annuity options. This suggests to me that individuals selecting option 4B are not cross shopping against the joint survivor annuities.

Now the results I just shared are for all service retirees, but what can we learn from how these selections change based on the size of your monthly benefit amount? In the lower monthly benefit buckets, the maximum option is the undisputed king. For those receiving one to $500 a month, over 72% choose the max option to keep as much cash as possible. But look at what happens as the monthly checks get larger. For retirees receiving over $5,000 a month, the selection of the max option drops to 50%. What are these retirees choosing instead at the higher income buckets? Option 4A, 50% joint survivor annuity jumps from 2% to 13%. Option 2, the 100% joint survivor annuity jumps from 12% up to 22%. And option 4, the 75% joint survivor annuity jumps from 1% up to 5%. Essentially, as a retiree's monthly income grows, they become twice as likely to spend some of that benefit to ensure their spouse or other beneficiary is protected by selecting one of the joint and survivor annuities. What is most surprising to me looking at the distribution across monthly benefit amounts is again option 4B and the fact that it consistently is chosen at the same rate, seven to 8%, regardless of monthly benefit amount.

Why do we see the shift from single life annuity to joint and survivor annuities as monthly benefit amounts increase? Survival versus survivor protection. For those with smaller benefits, the monthly reduction for a survivor option might make the check too small to live on. They choose the max option out of necessity. Survivor benefits as insurance. High earning retirees may view option two, option four, and option four A as a form of life insurance for their families at a better cost. Single verse married. It may be the case that those with higher monthly benefit amounts are simply more likely to be married and choose a joint and survivor annuity, but we would need more data from PERS to confirm this hypothesis.

Now that you've seen the data, here are your action items for today. One, request an estimate. Request an estimate from PERS to understand your seven PERS options based on your preliminary beneficiary or beneficiaries. Two, understand the PERS options. If you aren't sure which option is which, go back and watch videos 35 through video 41 where we provide an overview of each one. Three, review your beneficiary info. Ensure your beneficiary information is current. Remember, every option requires at least one beneficiary, and if updates are needed file form 1b with PERS.

We will transition into strategy as we discuss what service retirement benefit option should a PERS retiree select? 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 public 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.