Thinking About Retiring Early?
Last Updated July 2009
Print Version
For Plan 2 and Plan 3 Members of the Public Employees' (PERS), Teachers' (TRS) and School Employees' (SERS) Retirement Systems.
Note: The 2008 Early Retirement Factors (ERF) detailed in this publication became available beginning 7/1/2008 (PERS), 9/1/2008 (SERS and TRS), and were established by legislation which ended gain sharing. If a court of law decides the repeal of gain sharing is invalid, the factors and return to work rules in place before passage of the law will apply.
As a Plan 2 or 3 member of PERS, SERS or TRS, you have the option to retire early and begin receiving a retirement benefit once you meet the minimum service requirements. This publication provides information about some of the things to consider before deciding if early retirement is right for you.
What is my normal retirement age?
If you are a Plan 2 member, you are eligible for normal retirement at age 65 if you have at least five service credit years.
If you are a Plan 3 member, you are eligible for normal retirement at age 65 if you have at least:
- 10 service credit years, or
- Five service credit years provided at least 12 service credit months were earned after age 44, or
- Five service credit years earned in Plan 2 before:
- June 1, 2003 (PERS) and transferred to Plan 3, or
- September 1, 2000 (SERS) and transferred to Plan 3, or
- July 1, 1996 (TRS) and transferred to Plan 3.
What is the earliest age I can retire?
If you are a Plan 2 member, you can retire as early as age 55 with a reduced benefit if you have at least 20 service credit years.
If you are a Plan 3 member, you can retire as early as age 55 with a reduced benefit if you have at least 10 service credit years.
Plan 2 and Plan 3 members: In some cases you can retire at age 62 with an unreduced benefit. Retirement before age 65 is considered an early retirement.
What is the impact on my benefit if I retire early?
While you are able to begin receiving a retirement benefit when you retire early, your benefit is affected because you will begin receiving it before age 65. The amount of the impact depends on your service credit, the date you retire, your age and the early retirement factor used.
If you retire with at least 20 but less than 30 service credit years (Plan 2), or you retire with at least 10 but less than 30 service credit years (Plan 3):
- Your benefit is reduced by a factor that is based on your average life expectancy. The reduction is greater than if you retire with at least 30 service credit years.
If you retire before July 1, 2008 (PERS) or September 1, 2008 (TRS and SERS) and have 30 years or more of service credit:
- Your benefit is reduced by an early retirement factor (ERF) of three percent for each year before age 65 that you retire.
If you retire on or after July 1, 2008 (PERS) or September 1, 2008 (TRS and SERS) and have 30 years or more of service credit, you can choose either:
- The three percent ERF as described above, OR
- The 2008 ERF which provides a smaller benefit reduction but imposes stricter return to work rules. See the table and the section “Can I retire early then return to work and continue to receive my benefit?”
Why is there a difference if I retire before or after the 2008 effective date?
The 2007 Legislature established new early retirement factors and return to work rules for Plan 2 and 3 members who retire with 30 years or more of service credit. The new law took effect July 1, 2008 for PERS members and September 1, 2008 for SERS and TRS members. If you retire before that date, you are covered under the three percent ERF rule described above. If you retire on or after that date, you have the choice of either the three percent or 2008 ERF.
What reductions apply if I retire early?
If you retire before age 65, your benefit is reduced to reflect the fact that you will receive it over a longer period of time. The amount of the reduction depends on how much younger than age 65 you are when you retire and the amount of service credit you have. The table below shows the early retirement factors used (see Washington Administrative Code 415-02-320 for details).
| Early Retirement Factors Table | |||
|---|---|---|---|
| Retirement Age | At least 10 or 20 years service | 30 years or more service | |
| 3% ERF | 2008 ERF | ||
| 55 | 0.358 | 0.70 | 0.80 |
| 56 | 0.395 | 0.73 | 0.83 |
| 57 | 0.435 | 0.76 | 0.86 |
| 58 | 0.481 | 0.79 | 0.89 |
| 59 | 0.531 | 0.82 | 0.92 |
| 60 | 0.588 | 0.85 | 0.95 |
| 61 | 0.652 | 0.88 | 0.98 |
| 62 | 0.724 | 0.91 | 1.00 |
| 63 | 0.805 | 0.94 | 1.00 |
| 64 | 0.896 | 0.97 | 1.00 |
Plan 3 members must have at least 10 years of service. Plan 2 members must have at least 20 years of service.
The 2008 Early Retirement Factors (ERF) were available beginning 7/1/2008 (PERS), 9/1/2008 (SERS and TRS), and were established by legislation which ended gain sharing. If a court of law decides the repeal of gain sharing is invalid, the factors and return to work rules in place before passage of the law will apply.
Examples
Plan 2 is based on the benefit formula:
2% x Service Credit Years x Average Final Compensation x ERF = Monthly Benefit
Plan 3 is based on the benefit formula:
1% x Service Credit Years x Average Final Compensation x ERF = Monthly Benefit
Retirement on July 1, 2009 at age 55 with 22 years of service credit
You retire on July 1, 2009 at age 55 with 22 years of service credit. Your average final compensation is $3,600. You are retiring early so your benefit is 35.8% of what it would be at age 65. Your monthly benefit is calculated as follows:
Plan 2 Monthly Benefit
= 2% x 22 years x $3,600 x 35.8%
= .02 x 22 x $3,600 x .358
= $567.07
Plan 3 Monthly Benefit
= 1% x 22 years x $3,600 x 35.8%
= .01 x 22 x $3,600 x .358
= $283.54
Retirement on March 1, 2008 at age 60 with 30 years of service credit
You retire on March 1, 2008 at age 60 with 30 years of service credit. Your average final compensation is $4,000. You are retiring early so your benefit is 85% of what it would be at age 65. Your monthly benefit is calculated as follows:
Plan 2 Monthly Benefit
= 2% x 30 years x $4,000 x 85%
= .02 x 30 x $4,000 x .85
= $2,040
Plan 3 Monthly Benefit
= 1% x 30 years x $4,000 x 85%
= .01 x 30 x $4,000 x .85
= $1,020
Retirement on October 1, 2009 at age 62 with 30 years of service credit
You retire on October 1, 2009 at age 62 with 30 years of service credit. Your average final compensation is $4,400. If you choose the three percent ERF, your monthly benefit is calculated as follows:
Plan 2 Monthly Benefit
= 2% x 30 years x $4,400 x 91%
= .02 x 30 x $4,400 x .91
= $2,402
Plan 3 Monthly Benefit
= 1% x 30 years x $4,400 x 91%
= .01 x 30 x $4,400 x .91
= $1,201
If you choose to retire under the 2008 ERF, your benefit is unreduced but you have stricter return to work rules. Your monthly benefit is calculated as follows:
Plan 2 Monthly Benefit
= 2% x 30 years x $4,400 x 100%
= .02 x 30 x $4,400 x 1.00
= $2,640
Plan 3 Monthly Benefit
= 1% x 30 years x $4,400 x 100%
= .01 x 30 x $4,400 x 1.00
= $1,320
Can I retire early then return to work and continue to receive my benefit?
Your benefit is not impacted if you return to work for an employer not covered by a Washington state retirement system.
If you retire with less than 30 years of service credit or you retire under the three percent ERF, and wait at least 30 calendar days after retirement before returning to work, you can work:
- Up to 867 hours each calendar year in a position that is eligible for retirement system coverage and continue to receive a benefit. If you work over 867 hours, your benefit will stop until you quit working or the next calendar year begins.
- An unlimited number of hours each calendar year in a position that is not eligible for retirement system coverage and continue to receive a benefit.
If you retire using the 2008 ERF, and have not reached age 65, you cannot work:
- In any capacity for a DRS-covered employer and continue to receive your benefit. If you do return to work, you will not receive your monthly benefit for any month in which you work. Your benefit will restart the first of the month after you stop working. Once you reach age 65, you can work under the rules previously described.
You cannot earn compensation from a DRS-covered employer for services performed as a contractor and continue to receive a monthly benefit.
For more information, refer to the DRS publication, Thinking About Working After Retirement?
Other Questions?
If you have questions about retiring early that are not covered in this publication, please contact DRS. Be prepared to provide your name, Social Security number, and retirement system and plan.