Before the New York City Police Pension Fund (NYCPPF)
finalizes your pension, you (the retiree) may either choose a pension option or
the Maximum Retirement Allowance. Choosing the Maximum Retirement Allowance
means that all pension benefits will cease on your death. Choosing an option
provides for a beneficiary or beneficiaries after your death.
If you want to provide continuing income to a beneficiary,
you need to know the cost of the option, which depends on your age, and the age
of your beneficiary(ies), as of your retirement date.
If you want the Maximum Retirement Allowance, but also wish
to provide for a beneficiary, you could explore commercial insurance policies
or annuities.
Remember that with all the Pension Fund options you are
effectively buying life insurance in some form or another, with certain
actuarial assumptions assumed. All options are based on life expectancy for
yourself and the beneficiary when you take an option other than full pension.
There is an important distinction here though. Life insurance underwriting is
very much based on the insured’s health and since the Pension Fund options
cannot test your health, they must assume a below average health condition in
their actuarial calculations for your cost. It is like those life insurance
policies you see advertised on TV where they say “no medical exam and you
cannot be turned down.”
So if your health is good (or even mediocre) you are better
off buying your own life insurance rather than take what is effectively the
high cost life insurance the pension option offers. Also, having your own
policy allows you to change beneficiaries for whatever reason you wish, and you
also can cancel the policy and the payments should you no longer need it. So if
you can get a good policy based on your health you are better off, but make
sure you lock in a good rate for a long term since it is very expensive later
in life to extend your coverage.
At Article II Pension Consulting we stand ready to give you
the very best, no obligation, advice and commercial insurance comparisons so
that you can see why, that unless you are ill, the various options offered by
the pension plan never make sense.
Please be aware that
many people make the mistake of getting a full medical work-up before applying
for insurance because any problems discovered will be disclosed to the
insurance company. Better to let them give you the exam, which is usually
superficial and given at home by a nurse.
