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Choosing a Benefit Payment Option
Choosing a benefit payment option is one of the most important things you’ll do when you apply for retirement with TCDRS.
As you consider your benefit payment options, think about your overall income needs in retirement, whether your spouse is covered by his or her own retirement benefits and the ongoing financial needs of your loved ones after you pass away. All of these factors may influence the option you select. Your options are:
Single Life: Provides the highest monthly payment, but all payments stop when you pass away. Your beneficiary will not continue to receive monthly payments. You might select this option if you are single and have no dependents or if you are married and your spouse has his or her own retirement benefit.
Guaranteed Term: You get a lifetime benefit. If you pass away before the term ends, your beneficiaries will continue receiving payments until the end of the term. You can choose terms of 10 or 15 years. The term starts on the day you retire. You might select this option if you want to provide financial support to a loved one in case you pass away during a certain timeframe, such as when a child is in college.
Dual Life: When you pass away, your beneficiary receives 100%, 75% or 50% of the benefit you received for life. The lower the percentage you leave to your beneficiary, the higher your monthly payment. You may name only one primary beneficiary. You might select this option to provide for a spouse or other loved one who needs lifetime financial support.
100% to Beneficiary With Pop-Up: Under this Dual Life option, your beneficiary receives 100% of your monthly payment for life when you pass away. However, if your beneficiary passes away before you, your monthly payment will “pop up” to a higher monthly amount, as if you had retired under the Single Life benefit payment option.
You can experiment with different options to find the best fit for your retirement needs. To run benefit estimates, sign in or register for online account access, or call Member Services at 800-823-7782.
In summary, here are your benefit payment options at a glance:
Decide Whether You Will Take a Partial Lump-Sum Distribution
Some employers give you the option of taking a single payment of up to 100% of your TCDRS account balance when you retire. The lump-sum payment lowers your monthly benefit over your lifetime. You still get monthly benefit payments for life, but the payments will be smaller based on the amount of the lump-sum payment.
A lump-sum payment may also have serious tax consequences. We are required by the IRS to automatically withhold 20% of your payment for taxes. You may also be subject to additional tax penalties. You can specify additional withholding when you apply for your partial lump-sum payment.
Before selecting this option, please contact Member Services at 800-823-7782 to find out how it will affect your lifetime benefit payment.
Consider Applying for Social Security Benefits
Visit the Social Security website to apply for benefits online or to request an estimate. Remember, if you wait and start your Social Security benefit later, it will be higher. The monthly benefit for your spouse after you pass away may also be higher if you wait.
Get more information on why TCDRS is a model plan when it comes to retirement.