Temporary Annuity Option/Social Security Modification
Government Code Section 31810
If you are covered by Social Security and retire before age 62, you may receive additional income from StanCERA until you reach age 62 and become eligible for Social Security. This type of temporary annuity results in you receiving a higher benefit from StanCERA than you would otherwise receive prior to age 62 and a lower benefit from StanCERA than you would otherwise receive after age 62.
The intended effect is to smooth out or create a more uniform total retirement income (i.e. StanCERA benefit plus Social Security benefit) for life. The benefit you receive from StanCERA at age 62 and beyond is what you were receiving prior to age 62, less the Social Security estimate of your benefit at age 62 estimated as of today.
If you are interested in receiving this type of temporary annuity, you should contact the Social Security office to obtain an estimate of benefits available to you at age 62. The request should be made at least three months prior to your anticipated retirement date. StanCERA will then calculate what the adjustment (increase) would be to your normal StanCERA benefit when you first retire (prior to age 62). Remember your benefit will be reduced by the full amount of the Social Security estimate when you turn 62, whether or not you apply for Social Security benefits and regardless of the actual amount of your Social Security benefits.
The following calculations illustrate how a temporary annuity might affect the retirement benefit of a hypothetical member:
Social Security Estimate Today:
Percent of Social Security estimate received (from StanCERA) prior to age 62:
Temporary Annuity (received from StanCERA up to age 62):
Monthly Retirement Benefit before age 62:
StanCERA Normal Retirement Allowance:
Add Temporary Annuity:
Total Benefit from StanCERA:
Monthly Retirement Benefit after age 62:
StanCERA Benefit before age 62:
Subtract Social Security Estimate:
StanCERA Benefit at age 62 and beyond:
Social Security Benefit:
Total Monthly Benefit (StanCERA plus Social Security):
Thus, in this example, StanCERA will pay you $554 a month more than you would normally receive up to age 62 (total of $3,354/month). Then at age 62, StanCERA will reduce your benefit to $2154/month. This is a reduction in your StanCERA benefit of $1,200/month. Remember, the above is ONLY an example. Most likely it will never be the case that what you are receiving prior to age 62 (from StanCERA) will equal what you receive from age 62 and beyond (from StanCERA and Social Security), since the estimate from Social Security today is exactly that, an estimate. Most likely, what you actually receive from Social Security at age 62 will be different from the estimate today. However, the amount you will receive from StanCERA at age 62 and beyond will not change, regardless of what you ultimately receive from Social Security.
You will receive the temporary annuity from StanCERA through the month of your 62nd birthday. You must contact Social Security to begin receiving your benefit from them. Since the Social Security office will not make your benefit retroactive, you should contact their office at least three months before your 62nd birthday to ensure your benefit begins the first month you are eligible, the month following your 62nd birthday.
It is important to understand that depending on your age at retirement, this could be a very important decision for you to make today. The closer you are to age 62, most likely, your financial situation at that age will not be affected much by this decision. However, if you are still several years away from reaching age 62, it is imperative that you understand your financial situation at age 62 might be harder for you to project or predict today. In other words, few people may really understand what their financial situation may be or what their liquidity (cash) needs may be several years out, and the incentive to receive more of your benefit today may put you in a difficult position at age 62. Please keep this in mind as this is an irrevocable option once you choose it.