A Discussion of Retirement
(Conclusion)
By JE R R Y S. SA Y LE R
Optional settlements at retirement
are closely B gged to r e te n tS iJn ser
vice after retirement age. When a
member retires on pension there are
four different „plans for payment avail
able to him. The unmodified form,
which is a straight-life annuity.
ing at the death of the annuitant and
does not include a - survivor. Under
this plan the annuitant receives the
largest amount possible.
O w n H i s a cash refund plan arid
while the annuitant receives slightly
less per month than under the un-
modified plan, he is guaranteed that
either he or his surviving lfeWBiwa|.y
will receive through annuity payments'
or cash refund at least as much as the
total of his own contributions.
Under option 2K B ^ ^ S u ita n t re-
ceives considerably less than under
■
S f f i n 1 or the unmodified form, but
if his named beneficiary survives him,
she will receive for life the same peri-
sion he received during his life. The
amount-of pension depends upon the
age of the benefgæ iM as well as that
of the member. When the survivor is
the spouse, a very rough general av
erage would provide a pension ap
proximately 30% to 35% less than”: the
unmodified form.
Option 3 is very similar to option
2 except that the survivor receiyes on
ly one-half as much as the member
received during^jhis: lifetime. If the
surviving beneficiary is the spouse,
the average reduction from the amount
available on the unmodified form is
very roughly 20% to 25%.
When a member reaches retirement
age, his employer may recommend to
the retirement board that continued
service by the é m igy e W ^ n the pub
lic interest'and if the retirement board
approves, the employe may be retained
for successive periods of one year, sô
long as thé employer and the retire-
men t board mutually agree that the
continued service
the public in
terest. Retention of employes at S be
yond retirementwage should be based
on consideration of the public inter-
est^^^/required by law, but equally
important, it seems to me j-’raxei the best
in ® |S t^ o f the member.
AlmosGLey^ryone, I think, would
agree that it is to the member’s inter
est to be retained since he will con-
||||u2«t?o ¿receive fhis^ sW$HM®|ather than
a much lower pension and his^eiibipii-
will continue to grow. H o w g S . it
must be remembered that should Rfre
die on the job or in service, all his
beneficiary or his estate can recover
is the amount of his own net contri
butions.
The options which we have been
discussing cannotS^Bspme effective
membla actually retires, is
eligible for pen^^™ and has selected
his option. In other words, the em-
ploye has not established for himself
and his survivor a vested right in the
employer’s contributions until he ac-
tually r e t « ' on pension.
One example will suffice. Wfe have a
member under/ retention who is 79
years of age and whose wife g 69.
Obviously, he will not be able to con-
'tinhe on the job for more than an-
other year or two at most, and his
salary is not large. Were he to retire
now, he could have between $80 and
$90 per month on the unmodified plan
or about $50 per month under option
2. These values capitalize for approx
imately $7,000. The member has con-
tributed about $1100. At age 79 life
is.; very uncertain. If he dies imsepvice
we will refund to the widow $1100. If
he retires on pension, we will normal-
ly pay in pension to the member and
survivor an amount the present val
ue of which is $7,000. Actually, if both
live out their expectancies, we will
pay considerably more, over*'the years,
than the $7,000.;IsBnis«.-member justi
fied in gambling $7,000 against $1100