FRS Pension Option 4 — 1/3 Decrease for the surviving spouse
The fourth Florida Retirement System pension option is one of the least chosen options because of it’s unique benefit feature. Option 4 is a lifetime option for both participant and spouse, but if either the participant OR their spouse dies the pension is reduced by 1/3 for the rest of the surviving spouse’s life. Like option 3, this option payout is based on the participant’s spouse’s life expectancy.
The main reason people pick option 4 is for it’s increased payout. Option 4 has a higher payout than option 3 and in rare occasions a payout higher than option 1. With the increased payout, not only are your monthly pension payments higher, your C.O.L.A. will compound on a higher pension amount and your DROP amount will be larger.
The participant can use the increase in pension amount to buy life insurance on both themselves and their spouse, which may not only make up for the 1/3 reduction, but could also be left to contingent beneficiaries. There are also life insurance policies called “first to die” policies, which are a good option, but have become increasingly rare.