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Serving New York Educators Since 1921

Maximum or an Option
Choosing a Benefit Payment Right for You

  The Decision | The Considerations | The Statistics
The Choices | The Process
 

The Decision

ImageWhen you retire, you must decide how your monthly benefit will be paid – either in the form of the Maximum benefit or an option. As you make your decision, there are many important factors to consider, including: your financial needs and goals, as well as those of your beneficiary(ies); sources of income beyond your pension, such as investments and assets; your health and age at retirement; and, the possible need for flexibility of coverage.

There is no one-size-fits-all benefit choice, so this pamphlet will help you decide based on your unique situation. We explain features of each choice, provide statistics on selections made by recent retirees, and suggest a strategy for making your choice.

The Maximum benefit provides the largest monthly payments to you for life, but provides no payment to a beneficiary. (Beneficiaries of eligible Tier 2-6 members may receive a benefit under provisions of the Paragraph 2 death benefit, regardless of whether the Maximum or an option is selected at retirement.)

Selecting an option means a lower monthly benefit for you, but it can provide a payment to a beneficiary upon your death. Options serve much like life insurance coverage and might be a wise choice if you are unable to obtain adequate private insurance. How much lower your monthly benefit would be compared to the Maximum depends on the type of plan you select and, in some cases, the beneficiary you name.

No matter which choice you make, there are a few certainties:

  1. You must indicate your payment choice on your Application for Retirement (RET-54).
  2. You have 30 days from your date of retirement to change your mind. After that, you cannot change your selection, even if your circumstances change (e.g., due to a divorce or death).
  3. Your payments continue without exception until your death.

The Considerations

Always consider your own unique circumstances. The chart below is for reference, but don't let what someone you know has selected influence your decision. Keep beneficiaries in mind when choosing.
Be sure to research and fully understand the differences between private insurance and an option – before you retire. After comparing coverage and cost, you may discover that insurance meets your needs better than an option would. Or you may find that a combination of an option and private coverage is the best choice for you.

Collect data on all of your assets and expected expenses. When tallying your assets, don't forget to include your Social Security benefits (including survivor benefits), savings, investments, real estate and personal property.

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The Statistics

Retirement Benefit Options and Percent of Election
(2009-2013 Retirees)

Maximum 65.75%
Pop-Up 22.42%
Survivor 6.08%
Alternative 3.39%
Guarantee 2.05%
Annuity/Declining Reserve 0.31%

 

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The Choices

An understanding of your benefit payment choices can help you devise a personal financial plan. While we encourage you to begin planning for retirement early in your career, you will not need to select a benefit payment choice until retirement.

Keep in mind that your needs may change over time, so it's also important to allow some flexibility in your planning.

Maximum (All Tiers)

Features You Might Consider If You:
  • The largest benefit you can receive, paid to you for life.
  • There are no beneficiary payments upon your death (except as may be provided by the Paragraph 2 death benefit available to Tiers 2-6).
  • Are single with no dependents.
  • Have a spouse who will not need income from your pension because he/she has sufficient income/assets.
  • Have private insurance that will comfortably protect your beneficiary(ies).

Options

Features You Might Consider If You:
Survivor (All Tiers)
  • A payment lower than the Maximum benefit, paid to you for life.
  • You name one beneficiary who cannot be changed more than 30 days after you retire.
  • Your age and your beneficiary's age are factors in the calculation of your benefit.
  • Upon your death, your beneficiary receives a percentage (selected at retirement) of your benefit for life.
  • A surviving spouse is eligible for 50% of the cost-of-living adjustment the retiree (if eligible) would have received.
  • Your benefit will not change if you survive your beneficiary.

 

  • Have a spouse (or other beneficiary) who needs a guaranteed lifetime income if he/she survives you.
Pop-up Survivor (All Tiers)
  • A payment lower than the Maximum benefit, paid to you for life.
  • You name one beneficiary who cannot be changed more than 30 days after you retire.
  • Your age and your beneficiary's age are factors in the calculation of your benefit.
  • Upon your death, your beneficiary receives a percentage (selected at retirement) of your benefit for life.
  • A surviving spouse is eligible for 50% of the cost-of-living adjustment the retiree (if eligible) would have received.
  • If your beneficiary dies before you, your future monthly payments increase to the Maximum after NYSTRS is informed of your beneficiary’s death.

 

  • Have a spouse (or other beneficiary) who needs a guaranteed lifetime income if he/she survives you.
  • Need the additional income of the Maximum if your beneficiary predeceases you.
Guarantee Period (All Tiers)
  • A payment lower than the Maximum benefit, paid to you for life.
  • You can name one primary and multiple contingent beneficiaries, and can change them at any time.
  • If you die during the first 5 or 10 years of retirement, depending on which you selected, your beneficiary receives your benefit for the balance of the 5- or 10-year period. When the period expires, the beneficiary is no longer eligible to receive a benefit.

 

  • Want to provide income to a child who may be in college during the first 5 or 10 years of your retirement.
  • Have a spouse or other beneficiary who may only need income for a defined period until other funds are payable.
Declining Annuity Reserve Lump Sum (Tier 1 and 2 members who have contributions)
  • A payment lower than the Maximum benefit, paid to you for life.
  • You can name more than one beneficiary and change your beneficiary(ies) at any time.
  • The balance of your Annuity Reserve Fund is paid to your beneficiary(ies) if you die before you receive it yourself.

 

 

  • Would select the Maximum, but want to guarantee any remaining Annuity Savings Fund contributions will be paid to your beneficiary.

 

Declining Reserve Lump Sum (Tier 1 Only)
  • A payment lower than the Maximum benefit, paid to you for life.
  • You can name more than one beneficiary and change your beneficiary(ies) at any time.
  • The balance of your total reserve (the pension reserve and your annuity reserve, if any) is paid to your beneficiary(ies) if you die before you receive it yourself.

 

  • Are a Tier 1 member who is retiring because of a critical or terminal illness and you have a short life expectancy.
Largest Non-Declining Lump Sum (All Tiers except Tier 3 members retiring under Tier 3)
  • A payment lower than the Maximum benefit, paid to you for life.
  • You can name more than one beneficiary and change your beneficiary(ies) at any time.
  • At retirement, you determine a fixed lump sum to be paid at your death to your beneficiary(ies).


  • Are a Tier 1 member and want to leave a fixed lump sum to a beneficiary.
  • Are a Tier 2-6 member who is critically ill and you want to provide a fixed lump sum payment to a beneficiary.
  • Desire a lump sum payment to a beneficiary, but are unable to obtain sufficient private insurance (all tiers).
Alternative (All Tiers)
  • You can modify an existing option to meet your specific needs if it can be computed actuarially.
  • The modification requires approval by the Retirement Board.
  • Your ability to name more than one beneficiary and change that beneficiary after you retire depends on the option you select.

 

  • Need flexibility in the type of option you select (e.g., if the survivor options are too expensive because your beneficiary is young, or you are unable to obtain adequate private insurance).

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The Process

  1. Get an estimate of your benefit payment at a consultation with a NYSTRS representative (see the Benefits Consultations page for sites and scheduling information), by using the Benefit Estimator in MyNYSTRS, by submitting an online request for benefit projections to be mailed to you, or by calling us at (800) 348-7298, Ext. 6020. Provide the following information:
    • Retirement date(s). You can request estimates for different dates to see how much your benefit increases if you continue to work.
    • Current and future salaries, including additional earnings (e.g., summer school, coaching, etc.). If you do not know your salaries, we will assume 2% increases per year over the last known salary.
    • If your date of membership is prior to June 17, 1971, the amount and expected date of any payments for unused sick or vacation leave, or a local retirement bonus or incentive.
    • The date of birth and gender of your beneficiary for estimates of the survivor options that guarantee a lifetime income for one beneficiary.
  2. Review all sources of income, and research your eligibility for and the cost of private life insurance. If you have a beneficiary, determine what he/she will need to live comfortably should you predecease him/her.
  3. On your Application for Retirement, select the benefit payment choice that best meets your needs and those of your beneficiary.
  4. File your retirement application with NYSTRS up to 90 days prior to your date of retirement. Print an application from the Forms page at www.nystrs.org or request one by calling (800) 782-0289.
  5. If necessary, you may change the benefit payment you selected at retirement up to 30 days after your date of retirement. To do so, complete and file with NYSTRS the Election of Retirement Benefit form (RET-54.6), which is also available on the Forms page of our website or by calling (800) 782-0289.

New York State Teachers' Retirement System

10 Corporate Woods Drive
Albany, NY 12211-2395
(800) 348-7298
www.nystrs.org

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