Getting married after retirement may give you a one-time opportunity to add your new spouse as your survivor for your pension benefit. But there are specific rules and deadlines you’ll need to know about. We sit down with Kumano to chat about who may be eligible, when you can make the change and how adding a survivor can affect your monthly benefit.

Episode transcript:

[music intro]

Jenny

Welcome back to Fund Your Future with DRS. So, with retirees living longer, it’s common that retirees may get married or remarried after they begin collecting their pension benefits. And getting married after retirement is an opportunity to reconsider if you want to have a survivor listed as part of your pension. So, we’ve invited Kumano back on the podcast to talk about all this. Welcome.

Kumano

Oh thank you. Good to be here again.

Seth

So, for our frequent listeners, they’ll remember that we had Kumano on episode 28, where he came in and talked about how divorces can impact your pension. And so, this is a little bit of an extension of that conversation, but it’s not always the case that a person gets divorced and remarried after they retire. Could be the person was never married and then gets married after retirement.

But we’re going to focus on survivorship options after a person gets remarried. So, Kumano could you just first, remind our listeners what the survivorship options are when a person is retiring or collecting their pension benefit. We have Options 1, 2, 3 and 4, but what that means for people?

Kumano

Yeah Seth. So, that schedule of survivor options, which is two, three and four. Option 1 is just for the member, it’s for everybody. So, the survivorship will be based on Options 2, 3 and 4. And they vary in degree of reduction because they offer the survivor a different amount depending on the choice of the parties for survivorship. So, for example Option 2 would be called 100% joint survivorship, which is the most you could leave your survivor but also probably has the largest reduction in regards to what you would pay to get that survivorship for your, survivor after you pass.

There’s some other survivorships. Option 3 is called 50%, joint 50%. And so that means that whatever reduction you take for example, if your pension is $2,000, you take a reduction to add your spouse of $200, that your benefit would be $1,800. But for Option 3, it’s 50%. So they would only get 50% of that $1,800 if you passed before them.

And so Option 4, which is the final survivor option, is called joint and two thirds, which it’s the same principle instead of half, they would only get two thirds of whatever benefit you were collecting while you were alive, and they were added to your pension. So that’s the schedule of survivor options. And so, I would encourage anybody who does get married to reach out to DRS and get an estimate of what that looks like.

Seth

Perfect. So just to summarize that you’re lowering what as a retiree, you receive while you’re alive. So that way if you pass away before your spouse, your spouse is then going to receive an ongoing amount for the rest of their life. So, we’ll go through some examples and talk about what this could look like. Yeah.

Jenny

So, say a retiree wasn’t married when they retired at age 65, but then later got married at age 70. What would they need to do if they wanted to now add this spouse as a survivor on their pension?

Kumano

Okay, so this is a member who retired at 65 and they chose Option 1 just for themselves. And then later at 70 got married. And so, what they would want to do is they would want to reach out to DRS and ask for an estimate of benefits. But what I would also encourage that we have a rule in regards to adding survivors, which you have to wait at least a year to add that survivor, and you have to do it in the second year.

So, if you do get married, I would like you to call DRS and sort of understand the process and how it works and what you need to do. And then once you get to that one year anniversary, you would want to call DRS for a formal estimate. And the form required to add that spouse.

Jenny

Okay. And it kind of reminds me of when we talked to HCA about open enrollment or the special enrollment.

Kumano

Yeah, no, that’s a good comparison.

Jenny

If you have the birth of a child. They’ll sort of have these special exceptions. So that’s kind of what I think about.

Kumano

And that’s actually a good segue to our website, which we have a section on there called Life Events. And this is one of them where you get married. So that would be a good place to research adding a survivor.

Seth

So, let’s expand on this example a little bit. And Kumano as you were saying that all the action with DRS happens between the first and second year of marriage. And my understanding is part of this is sort of like an IRS requirement to ensure that somebody has time to think about it, but you can’t just make the decision right away after marriage.

So, let’s say a person in this example, the person is now in between their first and second year of marriage. You said they have to reach out to DRS to get an estimate of what their benefit would be. How is that calculated? How is it determined how much their benefit would decrease while they’re alive for what their survivorship options are?

Kumano

So, this kind of gets into the world of actuarial factors, which is what we use to do any reductions on pensions, whether you’re retiring early or adding a survivor. And so there are factors involved, which we use to reduce your pension to add your new spouse. And that is based on the difference in age between you, the member and the spouse that you’re going to add.

And typically in that schedule, you’ll find that if the survivor is older than you, the member, that the reduction will be much less. But if the survivor is younger than you, you’ll start to get into more steeper reductions because we’re going to pay them for a longer lifespan.

Seth

That’s exactly right. That’s the point I want to make sure we highlight is the idea is that DRS is going to, on average, pay out the same amount of money over the course of two lifetimes versus one lifetime, where like we had the plan to pay it out over one lifetime, and now we’re estimating how much we need to reduce the current benefit to pay out over the course of two lifetimes.

Kumano

And that’s correct. And the factors account for that.

Seth

Yeah. And so, and that’s why it depends on the age difference that the driving factor is if the new spouse is much younger then that reduction is going to be bigger.

Kumano

You can count on it being a little bit larger just because of the life expectancy.

Seth

So, I’ll jump in because it becomes very fact specific as you were saying, it depends on the age of the person. Also depends on what plan they’re in because there’s different.

Kumano

No, that’s a good point. I want to step in. And that’s a great observation that at each one of our plans we have studies done on that population which gives us factors, and some of them vary from plan to plan. But in essence, across all of them you’ll experience the same difference, which is if the survivor is older less of a reduction, if the survivor is younger more of a reduction.

Seth

Yeah. And so, I looked up these factors before we started recording. And that generally you’ll see somewhere between a ten and 30% decrease in the pension amount. But once again, that depends a lot on what the age difference is. And so that’s why you want to contact DRS and see what is the specifics for your situation. But a lot of our retirees who are considering this sort of option to add a survivor, it can be helpful for them to think about it like…

It’s a lot like buying a life insurance policy. You’re going to pay a certain amount each month and that’s lowering your pension. That’s like making the payment for the life insurance policy. But you’re going to then have that money available for your spouse if you pass away. And so I like to think about it, in the example we were talking about earlier, if their pension was reduced by $200 a month, that’s like paying $200 a month for that life insurance policy.

Kumano

And that’s a great analogy. It is exactly like that. You’re paying a monthly amount, a reduction, which will equal an amount in income to that survivor when you pass. I like to call it income protection. You’re basically protecting an income that you want to pass on to your spouse. But an insurance policy is a great analogy.

Jenny

We kind of covered all of the basics. Is there anything else that our listeners should keep in mind?

Kumano

Yeah, I think it’s really important when you’re dealing with financial matters such as this and lifelong decisions such as this, you should have sort of an approach on what you need to look at to make that decision. And of course, we talked about DRS and the process of contacting us, getting a formal estimate in the second year, and then of course the forms needed to add them.

But there are some other things to consider outside of DRS that may impact this decision. One of those is Social Security benefits. And so, you know, a lot of our retirees retire at 65. They start collecting Social Security. But some of the members may be collecting benefits from a prior spouse who had passed survivor benefits they’re called. So, it’s really good to contact Social Security and ask what the impact to those benefits would be if you do get remarried.

Really critical because that may change the whole decision. The second thing is, is health care benefits. Will my premiums go up? A lot of our retirees, have benefits through the Health Care Authority. They would be a great one to reach out to check on how that action would impact their premiums. And then, of course, the last two things I think are DRS centric.

It’s more about procedure and process. Like I said, the first thing to do when you get married is call us and ask you about how it’ll impact you, and then what the process is to add that person and then second, and lastly is don’t forget that first anniversary date to call us, because the clock starts ticking on that second year to get an estimate, formal estimate and the form to add that spouse so you can make an informed decision.

So again, consider the Social Security impact. The health care benefits impact. And then contacting us for a formal estimate in the second year of marriage.

Seth

And one thing we wanted to make sure I’ll give Kumano a chance to chime in on this, because we said there is one exception to that. Between the first and second year of marriage, one of the retirement plans is different, so I’ll give you a chance to just explain that one little difference for the one plan.

Kumano

Yeah, classically for DRS, we’re complicated because we have a lot of pension plans. And so there is a small pension plan population, State Patrol that has a different requirement for adding the spouse. And it’s just about the time that they have to wait. And so for State Patrol, they have to wait two years for marriage to add new spouse in the third year of marriage.

So that is the only different pension plan within our population of plans that requires you to wait two years. But everybody else other than State Patrol is just one year.

Seth

Yeah. And so it doesn’t hurt if that State Patrol person calls us in their first year. And then we’ll tell you, wait, wait one more year. But generally speaking, people need to call us between the first and second.

Kumano

And that’s a great way to wrap up this in regards to being informed. You do not have to wait two years. And please, if you do get married as a State Patrol person, call us right away like everybody and find out the process, the timing, so you can put that on your calendar and know when to call us.

Jenny

So, for all of our retirees who get married after retirement, this is certainly not a requirement. It’s just an option for your pension benefits. Completely optional.

Seth

It’s worth investigating.

Jenny

Worth investigating. Yes.

Kumano

I think it’s worth reaching out, getting information from us when that happens, and then contacting Social Security, Health Care Authority and make an informed decision.

Seth

Great. All right. Thanks Kumano.

Kumano

Thanks for having me.

Jenny

Thank you.

[music outro]

Disclaimer

Thanks for listening. And now we’d love to hear from you. What topics would you like to hear about? What questions do you have for us? Send an email to drs.podcasts@drs.wa.gov that’s drs.podcasts@drs.wa.gov. The Department of Retirement Systems provides this podcast as a public service, but it’s neither a legal interpretation nor a statement of DRS policy.

References to any specific product or entity do not constitute an endorsement or recommendation. The views expressed by guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. Views and opinions expressed by DRS employees are those of the employees and do not necessarily reflect the view of DRS or any of its officials.

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