When it comes to retirement planning, teachers and school employees in Plans 2 and 3 often ask whether it’s better to retire at the end of June (when they stop working) or in September (when their contract ends). Most choose a July 1 retirement date if the last day worked is in June. Why? It all has to do with what’s gained from an earlier start to benefits and COLAs (cost-of-living adjustments) compared with what’s earned from two extra months of service.
These two scenarios illustrate the differences:
So what’s best? The fact is, if you wait until September, the increase in your benefit from the service credit is minimal compared to the increase you'd receive by retiring in July with an earlier COLA and the extra two months of pension payments. This is why most teachers and school employees retire in July if the last day worked is in June.
If you have any questions about your retirement date or COLAs, please contact us.