Both CalSTRS and CalPERS offer pension payout options that can be unmodified, giving the public employees and teachers the entire payout. However, each also offer modified options which reduce the monthly payout amount, but provide a beneficiary a payout option upon the participant's death.
To fully maximize a pension payout, the member could buy life insurance that will supply the same monthly income to a beneficiary that CalSTRS or CalPERS would have paid. However, it will be at a discounted rate when compared to that offered by the system. This method is known as "Pension Maximization" and can save thousands of dollars each year in retirement.
CalSTRS Pension Payout - CalSTRS members who reach the age 55 and have at least five years of service credit are eligible to retire. Members under CalSTRS 2% at 60 also have the option to retire at age 50 with at least 30 years of service credit. You will need to elect a payout option which will provide you with an income in retirement. To provide a lifetime monthly benefit to a beneficiary when you die, you can elect this type of option at retirement. These special options allow you to distribute your retirement benefit over your life and the life of your beneficiaries.
CalPERS Pension Payout - To be eligible for retirement as a CalPERS member, you must be at least 50 years of age with a minimum of five years of CalPERS-credited service. If you became a member on or after January 1, 2013, and all of your CalPERS service is credited after that date, you must be at least 52 years old to retire.
Those who choose any modification options aside from the member only benefit can face loses. Other options reduce the maximum potential benefit because part of it is attributed to assist a beneficiary. When a participant choses this option, they are essentially purchasing a life insurance policy from the system. However, there are better options which allow participants to retain all benefits and still provide for a beneficiary. CalSTRS and CalPERS members can chose an unmodified option and purchase a spouse benefit elsewhere.