Jumpline magazine JUNE 2023 pages - Flipbook - Page 50
50
Jack Swerdloff, Ret.
Jumpline Editor
Editor’s Page
Serious drawback
to consider for FRS Retirement Option 4
Just a thought from my experience with FRS Retirement Option 4. I consider myself an analytical
guy and do thorough research on big decisions.
So I feel obligated to discuss the drawbacks of Option 4 that I am now experiencing. There are many
pros and cons to all options. In this article I only want
to bring to light a negative aspect of Option 4, which I
chose at 44 years old when I entered the DROP. At 37 I was
married. At 44 I entered the DROP. So after 7 years of marriage, while simultaneously being employed, I chose option 4.
On the FRS website what you can conspicuously see regarding Option 4: “If you elected Payment Option 4, upon the
death of either you or your joint annuitant, the monthly benefit
payment to the survivor is reduced to two-thirds of the monthly benefit amount you were receiving while both of you were
living.”
That does not imply there are any ramifications relating to
divorce. I was not concerned, as any of you know who knew
me then, I bragged constantly about how lucky I was in my
life of bliss.
What it does not say in any easy reading FRS documents,
is that if you “remove” the person as your joint annuitant,
then the same reduction in benefits occurs, as if there were a
death. That can come into play if you become divorced. In my
case, I was officially employed for 7.5 years while “married.”
Since I chose option 4, my now ex-wife cannot be removed,
unless I’d like my benefit to be reduced to 66% of my original
retirement check. That’s a painful surprise!
Digging deeper into FRS documents, you see this: “If you become divorced after you retire, you may nullify your Option 3
or 4 joint annuitant, unless you are prevented from doing so
by a Qualified Domestic Relations Order. Under your Option
3 benefit, your benefit would not change unless you name a
new eligible joint annuitant. Under Option 4, your
monthly benefit would be reduced one-third as
though your joint annuitant were deceased.”
What this says in a nutshell is that after divorcing,
if your choice was Option 4, you have 2 options.
You “may” nullify your annuitant. Or leave your former
spouse on forever. Remember if you choose to nullify, “your
monthly benefit will be reduced one-third as though your joint
annuitant were deceased.”
With an option 3 selection you may remove your chosen annuitant with no penalty. But if you took Option 4, and your
marriage status changes, you will be forced into one of those
two bad choices. Leave your ex on the books, and if you die,
they receive a hefty retirement. The other is to remove them
and take a 33% pay cut in the prime of your life.
Additional thought at some point, if your ex were to pass away
before you, a huge pay cut would come upon their death.
I retired at 47 and hope to live another 20, 30 or 40 years.
(Grandma turns 92 this year and she is kickin’!) If I find a great
person to spend my days with, this new person will get nothing from my 28 years and 3 months of service. After 7.5 years
of service while “working” and married.
I’d give you some suggestions for the DROP Option choice,
but financial advice is best left to the experts. The final decision is up to you and your gut.
Once chosen, an ex will have that Option 4 benefit forever, or you’ll receive
a huge pay cut.
jumpline@local1403.org
Ph: 786-869-0744
June 2023 | JUMPLINE Magazine
