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Deciding Which Oregon PERS Pension Benefit is Right for You

Understanding Your Oregon PERS Pension Benefit

As an Oregon public employee nearing retirement, understanding your Oregon PERS pension benefit options is crucial for effective retirement planning. In this blog, I will help you navigate the various pension options, ensuring you make informed decisions about your financial future.

It all starts with obtaining your unique Oregon PERS pension benefit estimate. You can get one in two ways: through a formal estimate or an informal estimate.

Informal Oregon PERS Pension Estimate

What is an Informal Estimate?

An informal Oregon PERS pension benefit estimate is a preliminary assessment of your potential retirement benefits. This estimate is accessible online through the PERS Online Membership System and provides an early glimpse into your financial outlook without requiring a detailed calculation.

Key Features of Informal Estimates

  • General Assumptions: Informal estimates rely on general assumptions and may not include specific details or recent updates that could impact the accuracy of the projection.
  • Broad Overview: They offer a broad overview of potential benefits based on current information but are subject to change as more accurate and up-to-date information becomes available.

If you are more than 24 months from retirement eligibility, using an informal estimate can be beneficial for getting an initial sense of your retirement benefits.

Formal Oregon PERS Pension Estimate

What is a Formal Estimate?

A formal Oregon PERS benefit estimate provides a comprehensive and detailed calculation of your potential retirement benefits. This type of estimate considers specific information about your credited service, final average salary, retirement plan options, and other relevant details.

When to Request a Formal Estimate

You can request a formal benefit estimate within 24 months of retirement eligibility. All you need to do is complete the estimate request form (links: Tier 1/Tier 2 Estimate Request, or OPSRP Estimate Request). I recommend requesting one as soon as you hit that 24-month eligibility window, even if you have no intention of retiring anytime soon. Why? When you request a formal benefit estimate, it prompts PERS to pick up your file and ensure the information around salary and the other elements that build your pension are accurate. If there’s missing information, it’s great to have time to update your file long before you consider retirement.

Advantages of a Formal Estimate

  • Thorough Review: It involves a thorough review of your PERS record, ensuring all relevant data is included in the calculation.
  • Accurate Projections: Offers a more accurate and personalized reflection of your potential retirement benefits, providing detailed breakdowns of various scenarios and options.
  • Informed Decisions: Provides a solid foundation for retirement planning, enabling you to make informed decisions about your financial future.

In this blog, we’re focusing on the available Oregon PERS pension options. If you want a comprehensive tour of your formal benefit estimate, check out our blog, How to Read Your Oregon PERS Benefit Estimate.

The Options for Your Oregon PERS Pension

Now that you have your Oregon PERS pension benefit information, let’s explore the options. If you learn best by watching, here’s a video where I walk you through it step by step.

Breaking Down the Main Oregon PERS Pension Options

Below is a graphic I’ve created to help you understand the seven main pension options available.

Option 1: Single Life

You receive the benefit for your life, and it ends upon your death. This option provides the highest monthly benefit.

  • Ideal for:
    • Single individuals
    • Those in a partnership where the partner has other streams of reliable lifetime income
    • Individuals much younger than their spouse
    • Those looking to maximize their monthly benefit amount

Refund Annuity (not available to OPSRP members)

The benefit is paid for your life, with a lump sum paid to a designated beneficiary if there is any remaining balance in the account upon your death.

  • Ideal for:
    • Those retiring later in life
    • Individuals concerned they may not live for another ten years (the usual breakeven for this strategy)
    • Those who wish to leave their benefit to someone other than a spouse, multiple beneficiaries, or a charitable organization

15-Year Certain (not available to OPSRP members)

You receive the benefit for your life; if you die before receiving 15 years of benefits, your beneficiary is entitled to the remaining payments until 15 years is reached.

  • Ideal for:
    • Those retiring later in life
    • Individuals concerned they may not live for another 15 years
    • Those who wish to leave their benefit to someone other than a spouse, multiple beneficiaries, or a charitable organization

Option 2: 100% Survivorship

You receive this amount for life, as will your partner if you pass before them.

  • Ideal for:
    • Married individuals
    • Those hoping to ensure their partner’s cash flow remains the same after they pass
    • Individuals older than their spouse
    • Those comfortable with the lower monthly benefit amount

Option 2A: 100% Survivorship with Step-Up

Similar to Option 2, but if your partner passes first, you can step up to Option 1, which provides the highest benefit amount.

  • Ideal for:
    • Married individuals
    • Those wanting to maximize their benefits if their partner predeceases them
    • Individuals younger than their spouse
    • Individuals wanting flexibility in their benefit options

Option 3: 50% Survivorship

You receive this amount for life; if you pass before your partner, they will receive half of the benefit amount.

  • Ideal for:
    • Married individuals
    • Those hoping to ensure their partner still receives some pension benefit after they pass
    • Individuals older than their spouse
    • Those comfortable with the lower monthly benefit amount

Option 3A: 50% Survivorship with Step-Up

Similar to Option 3, but if your partner passes first, you can step up to Option 1.

    • Ideal for:
      • Married individuals
      • Those wanting to maximize their benefits if their partner predeceases them
      • Individuals younger than their spouse
      • Individuals wanting flexibility in their benefit options

Lump Sum Payouts

While lump sum payouts provide immediate access to a significant sum of money, they come with several considerations:

  • Removes Monthly Benefits: Forfeiting the security of a steady monthly income for the rest of your life and potentially your partner’s life.
  • Tax Implications: Lump sum payouts may have significant tax implications. Consult with a tax professional to understand how this choice could affect your tax situation.
  • Impact on Death Benefits: Opting for a lump sum payout can impact survivor benefits, reducing the financial security for your beneficiaries.

While a terminal illness or other extenuating circumstances could make a lump sum benefit the right choice, those situations are rare. As with all irrevocable retirement decisions, be sure you’re considering your choices carefully from all angles before making a decision, ideally with the involvement of a financial professional.

Service Purchases

You’ll likely see two columns when you look at your pension details. One says ‘no purchase,’ and the other says ‘with purchase.’ No purchase is the monthly pension benefit available if you choose not to make any service purchase credits available from PERS. With purchase is the monthly amount available if you do make service purchases. These purchases can significantly impact your pension, so it’s important to understand them fully.

Purchase of Waiting Time

The most common service purchase is the waiting period, available to most Tier 1/2 PERS employees. This option allows you to buy back the 6-8 months of ineligibility at the start of your PERS employment. Purchasing waiting time can accelerate your eligible retirement date and increase your monthly pension amount. The cost of buying waiting time is determined through a formal Oregon PERS benefit estimate and can be made within 90 days of your retirement date.

Other Service Purchases

Other general service purchases include out-of-state work, military service, seasonal service, and more. Each type of service purchase has specific eligibility criteria and can impact your retirement benefits significantly.

You will receive information on all service purchases available listed on the last few pages of your formal benefit estimate.

Conclusion

Navigating your Oregon PERS pension benefit options can be complex, but understanding the differences between informal and formal estimates, the various pension options, and the potential for service purchases can help you make informed decisions. By carefully considering your options and consulting with a professional financial advisor, you can optimize your retirement benefits and ensure a secure financial future. As always, if you are looking for a thought partner to talk this through, I welcome the conversation.