Imagine this scenario: You unexpectedly pass away, leaving behind a spouse and your young child.
The path forward from a tragedy like that would be extremely difficult. And the issues your loved ones would face would require much more than just money. But money can be a major point of stress amid a loss like that, especially if you’re raising children. The bills don’t stop, even if one income does.
It’s a grim subject. It can be hard to even imagine this scenario. But it’s a reality that can happen without warning, as it did to Tyler. It’s important to know what would happen to you in this situation, especially if people rely on you.
What would happen to your finances?
First of all, what happens to money you have in a checking or savings account? Typically, the balance of those accounts simply transfers over to the person you’ve named as a beneficiary. For example, if you had $3,000 in a savings account, and you made your mom or your spouse the beneficiary, that $3,000 would transfer to them.
If you have a life insurance policy through work, an outside company, or even with PERA, your beneficiary would receive that amount, too, usually in one lump sum.
Being in a pension
But a pension is different than a savings account or a life insurance policy. You do have an account balance at PERA, like a savings account, but you’ve also been building service credit. So what would happen if you passed away while building a pension with PERA?
If you passed away before you had one year of service credit, PERA would double your account balance and send it to a beneficiary (or multiple beneficiaries).
But once you have a year of service credit, something different happens. You are automatically enrolled in the Survivor Benefits Program. This supersedes any one-time payment. Instead, people PERA calls “qualified survivors” would get monthly income, which could help pay for groceries, rent, clothes, tuition—the things your paycheck covered.
You don’t get to pick who these qualified survivors are—that’s determined by state law. And the exact amount these people receive can vary. But this brief overview covers many common situations.
If you have children
If you have children under 18 (or up to 23 if they are in school), they are first in line. They would immediately receive a monthly benefit. If you have one child, PERA would send 40% of your monthly Highest Average Salary (HAS) every month until your child ages out of the program. If you have two or more children, they would split 50% equally.
You can easily see the value of this benefit with some quick math. First, check out your account balance on PERA’s website or on your most recent annual statement. Let’s say you have $25,000. That’s a good amount of money! But how many months of expenses would that pay for if you had a 4-year-old daughter?
With the Survivor Benefit, instead of a lump sum, your daughter would receive a monthly check. If your HAS was $3,500 per month, she would receive $1,400. That’s $16,800 per year. If she was in school until she was 23, the total amount sent to her over time would be more than $300,000—12 times more than your account balance.
If you’re married
Once your children age out of the Survivor Benefit, or if you don’t have children at all, your spouse is the next person in line.
How much would your spouse get? If you have between one and 10 years of service credit, your spouse would receive 25% of your monthly highest average salary, every month, until he or she passes away. This benefit would begin when your spouse turns 60.
If you have 10 or more years of service credit, your spouse would immediately begin receiving a lifetime monthly benefit, the amount based on your service credit.
The value of knowing your loved ones are protected
If the above situations don’t apply to you, you still have a benefit. If you don’t have any qualified survivors (including types of qualified survivors not listed above), you can choose a beneficiary. This person would get one lump-sum amount—double the value of your account balance. To learn more about other situations, read PERA’s Survivor Benefits booklet.
No matter what your situation is, you and the people in your life matter. It’s good to know that your PERA membership could help them financially should the worst happen.
(Note: If you are eligible for a PERA retirement but continuing to work for a PERA employer, or if you are in the Denver Public Schools benefit structure, your Survivor Benefit works a bit differently. See the Survivor Benefits booklet or contact PERA at 1-800-759-7372)