A cost-of-living adjustment (COLA) is an annual adjustment applied to your retirement income to reflect changes in the economy (inflation). Most DRS retirement plans offer a COLA, but Plan 1 members in PERS and TRS only have a COLA if they selected it during retirement. View the 2025 COLA percentages by retirement date and plan. When will I receive the 2025 COLA? LEOFF Plan 1 COLAs take effect April 1 and start with April 30 benefit payments. All other DRS Plan COLAs take effect July 1 and start with July 31 benefit payments. You need to be retired by July 1 for at least one year to be eligible for a COLA. Once you’re eligible, you’ll receive any COLA starting with the pension payment issued at the end of July, and every year after. You don’t need to apply to receive the COLA – it’s automatic. How much will the COLA be? The maximum annual COLA you can receive for most DRS plans is 3%. If inflation that year is above 3%, the additional amount is applied to future adjustments (called COLA banking). Any year inflation is lower than 3%, the COLA can pull from banked amounts in prior years. This happens automatically and the adjustment is made for you. You could receive a different adjustment each year, depending on the amount available in your COLA bank. Will PERS 1 and TRS 1 receive a benefit increase? If the legislature changes the current law, most of these retirees could receive a one-time increase in July. There are several bills that could affect this decision. You can track all bills here.

Taxes are known causes of headache, nausea and anxiety. But when you save with the Deferred Compensation Program (DCP) there are actual tax benefits that can cure your taxation woes. Well, at least a few of them! Here’s how taxes affect your DCP savings: DCP has a Roth and a pretax option. Each option affects when your retirement contributions will be taxed. Use this handy calculator to see which option is best for you.What is Roth? Your contributions are made after your income is taxed. When you take a withdrawal, the earnings associated with your Roth contributions will not be taxed if you meet the minimum qualifications. These qualifications include a five-year holding period from the year of your first contribution, and a minimum age of 59½. If you withdraw before meeting these qualifications, your earnings will be taxed. What is pretax? Your contributions are made before they are taxed. Withdrawals, including investment earnings, are taxed in the year you withdraw them. Every pretax dollar you contribute reduces your taxable income by a dollar. As a result, you’ll pay less in your current income taxes for the year because, in the eyes of the IRS, you’ve been paid less money. This can help reduce the impact on your overall take-home pay. You’ll pay taxes on the contributions and earnings in the year the money is distributed, which could mean a lower tax bracket during your working years. Contributions to DCP will not impact your pension or Social Security benefits. That’s because only federal income tax is deferred, not pension contributions or Social Security tax. The DCP – Deferred Compensation Program webpage has more tips and information about how saving with DCP has many advantages in addition to tax savings. If your employer doesn't offer DCP, find out what retirement savings options you do have. Or think about opening a traditional pretax or Roth IRA through a financial institution. Overall tax considerations DRS and the investment record keeper Voya are not able to offer tax advice. Please work with a tax adviser if you have questions beyond the general information we can provide. Okay, disclaimer aside, here’s what we can tell you about your pension plan: For most people, whether you are in Plan 1, 2 or 3, your retirement contributions are deducted from your salary before taxes. This means these amounts have not been taxed (same as the pretax option available for DCP). Plan 3 doesn’t have a Roth option because current IRS laws don’t allow it. When you withdraw these funds, either as a withdrawal or in retirement, you will pay federal income tax on the money you receive. When we issue payment, DRS withholds IRS federal income tax for your distribution type. No matter what state you live in, we do not withhold state income tax. Good news is Washington is one of nine states that do not have a state income tax. As of 2025, these are the states without an income tax: Washington, Texas, Florida, New Hampshire, Tennessee, Wyoming, Alaska, South Dakota and Nevada. If you aren't sure where you will live when you retire, add this information to your retirement planning. If you live in one of the other 41 states, you will be responsible for determining any additional taxes owed when you receive a withdrawal or monthly pension payment. Tax tips The biggest tool you have is planning. Make sure your withholding information is accurate. Even if you don't file your taxes until April each year, calculate them in January or February every year so you’ll know in advance whether you'll owe. Did you get a refund this year? If you did, you overpaid your taxes and gave the government an interest-free loan. Think about the best way to use this year’s tax refund before you spend it on something you may want but don’t need. Use the refund to help build up your emergency savings, pay down debt, or get closer to achieving a personal savings goal. To help keep more of your money working for you throughout 2025 and beyond, consider increasing your contributions to DCP. Did you owe money this year? You can help change that next year by reducing your taxable income. Saving to DCP on a pretax basis can help you do that as well. With pretax saving, you’ll reduce your current taxable income and may also save money on the taxes you will eventually pay. It’s never too late to save for retirement or update your tax situation. Make this the year you take what you’ve learned to help improve your financial situation now and in the future.

Your retirement needs are unique. Not unlike your family tree that can show you where you got your brown eyes and curly hair, you also have a pension DNA. Unfortunately, there isn’t a money tree you can reference for personal financial matters but there are ways to estimate what you’ll need in retirement. There’s no need to be left worrying if your pension is enough. How much retirees spend on average It’s a good idea to compare your retirement outlook to what average retirees are spending. This can give you a ballpark of what your own situation might look like. The website for the Bureau of Labor Statistics surveys retirees. In 2023, the latest year for which data is available, households of those who were 65 or older spent an average of $64,326. Although this is the average across the U.S., we all know that inflation since 2023 has most likely increased retirees’ expenses; inflation should always be a factor in your overall financial considerations. While the U.S. average is a helpful factor to consider, it’s important to look at your own potential spending sources in your retirement years; many factors like these have changed in the past few decades: The average age of first-time parents has increased, meaning many people could still have expenses for raising children or paying college tuition in their retirement years. The cost of housing has increased along with the average age for homebuyers. If the trend continues, retirees may still have a mortgage. Other factors to consider include a careful examination of additional retirement income, including personal savings. Review all your financial resources Most people think of Social Security and personal savings as part of their retirement portfolio. However, recent news has not been favorable for the stability of Social Security funds in the not-so-distant future, and personal savings are dwindling in the face of inflation. In fact, according to the Social Security Administration’s 2024 financial report, fund reserves are projected to become depleted in 2035. But this is where the state’s Deferred Compensation Program (DCP) comes in to help. Investing your dollars into DCP could ease your Social Security and inflation worries. If your employer offers DCP (ask them!), it can be an excellent retirement savings opportunity. Not only can you set aside additional funds for retirement on top of your pension, you can also maintain investments that will continue to grow—even into your retirement years. DCP advantages It’s easy Contributions are automatically deducted from your paycheck, so saving is easy. Start with as little as $30 per month. You can also let your contributions grow with percentage deductions. It’s flexible Online or by phone, you can change your contribution amount and investment selections at any time. Your changes can take up to 30 days to go into effect (depending on your employer’s payroll cycle). It’s smart DCP offers a variety of professionally managed investment options, including “one-step” funds that automatically rebalance the asset mix as you move toward your target date for retirement. Funds are selected by the Washington State Investment Board, with fees among the lowest in the marketplace. You can roll qualified funds into DCP DCP can accept roll over funds from your previous employers if those funds are held in eligible retirement plans such as 457(b), 401(k), 403(b) and traditional, pretax IRA accounts. However, the IRS prohibits rolling Roth IRAs into DCP. Rolling funds into DCP requires two steps: You must be enrolled in DCP.  Submit a completed rollover-in form prior to sending us a check. Additional DRS resources for retirement planning Videos How can I save for retirement? Budgeting, debt management and prioritizing savings If I knew then … Lessons from those who’ve retired Podcasts Episode 49 – Social Security basics Episode 45 – First month of retirement; what to avoid Episode 43 – Millennials and inflation Episode 42 – Baby boomers: final advice for retirement Episode 41 – Gen X: growing up without financial advice Episode 40 – Gen X: never too late to start saving for retirement Episode 39 – Questions from listeners Episode 38 – How Gen Z is prepping for retirement Episode 24 – A Roth option for DCP Episode 22 – Investing when the stock market is down Episode 21 – DCP earnings and annuities

For a lot of people, retirement is a time to sit back and relax, or time to do some traveling. But some retirees like to stay busy by volunteering. They may even decide they want to go back to work after they retire. As a retiree, you can go back to work for a Department of Retirement Systems (DRS) employer and still receive your pension benefit as long as you follow a few rules. If you’re in PERS, TRS or SERS, you must wait at least 30 days after your effective retirement date before returning to work for any DRS employer. Also, you may not have any pre-arranged agreement, verbal or written, to return to work with your current employer before retiring. If you return to work for a non-DRS employer: Your pension benefit is not affected.(Example: Local businesses like a coffee shop or grocery store.) If you return to work for a DRS employer: Your pension benefit could be affected.(Example: Schools, Police, Fire, Department of Transportation.) Review the return to work page for more details including exceptions for certain jobs.